President Clinton's Radio Address: Congress' Costly Tax Cuts Will Drain the Surplus

PRESIDENT CLINTON'S RADIO ADDRESS TO THE NATION:
CONGRESS' COSTLY TAX CUTS WILL DRAIN THE SURPLUS AND PROVIDE FEW BENEFITS FOR WORKING FAMILIES

July 22, 2000

Today, in his weekly radio address, President Clinton will say that the tax cuts passed by the Republican Congress would threaten our fiscal discipline, drain the surplus, leave no money for key priorities like Medicare prescription drugs, and provide little benefit to most taxpayers. He will contrast the Republican plan with his approach, which maintains the same fiscal discipline that has contributed to our current prosperity, prepares for the future by strengthening Social Security and Medicare, invests in key priorities like a Medicare prescription drug benefit, provides targeted tax relief for American families, and pays down the debt by 2012.

The President will highlight a new analysis by the Office of Management and Budget (OMB) showing that the total cost of the tax cuts passed by the 106th Congress, piece by piece and without a coherent strategy, could drain the entire on-budget (non-Social Security and non-Medicare) surplus from 2001-10. The President will also highlight an analysis by the Department of the Treasury showing that middle-class families get twice as much tax relief from his more fiscally responsible approach than from the major tax cuts passed by the House Ways and Means Committee.

 

HIGHLIGHTS OF ADMINISTRATION ANALYSES

  • The tax cuts passed by Congress this year would cost more than $700 billion over 10 years; with interest they would drain over $900 billion from the surplus.
  • If the Republican Congress is still intent, either this year or next, on enacting tax cuts passed last year, including across-the-board reductions, the total cost of its tax cuts would be more than $1.4 trillion; with interest they would drain $1.8 trillion from the surplus. This would use the entire on-budget surplus, even according to the more optimistic projections by the Congressional Budget Office.
  • The major tax cuts passed by House Ways and Means would provide as much to the top 1 percent of Americans as to the bottom 80 percent of Americans.
  • Under the President's fiscally responsible plan, the tax cuts for middle-class families are substantially larger than under the Republican plan. The middle fifth of the income distribution gets an average tax cut of $371 annually from the major provisions of the President's $263 billion package. This is twice the $185 annually they would get from the major tax cuts passed by the House Ways and Means Committee. (This analysis is based on the marriage penalty bill originally passed by the House and does not include the Social Security benefit taxation repeal just passed by House Ways and Means.)

 

 

Tax Cuts Passed by the Republican Congress This Year Would Cost More Than $700 Billion; With Interest Costs They Drain More than $900 Billion From the Surplus

Instead of passing one large tax bill, this year the Republican Congress is passing its tax cuts piece by piece. But the economic and budgetary effect is the same. According to the new analysis by OMB, these tax cuts now cost more than $700 billion over 10 years. Accounting for additional debt service, the total drain on the surplus is over $900 billion:

 

 

TAX CUTS PASSED BY CONGRESS THIS YEAR ($billions, 2001-10)

     
 

Cost

Passed By

     

Marriage Penalty

$2931

House and Senate

Estate Tax Repeal

$105

House and Senate

Small Business / Minimum Wage

$123

House and Senate2

Social Security Benefits Tax Reduction

$116

House Ways & Means and Senate3

Communications Excise Tax Repeal

$51

House and Senate3

Pension and IRA Limit Increases

$52

House

Affordable Education

$21

House Ways & Means and Senate

Patients Bill of Rights4

$69

House and Senate

Taxpayer Bill of Rights

$7

House

Trade and Development

$4

Enacted

     

Total Cost (eliminating duplication)

$712

 

Added Interest

$201

 

Total Drain on Surplus

$913

 
     

Source: Cost estimates of individual bills are from Congress' Joint Committee on Taxation and total cost is based on an analysis by the Office of Management and Budget. The total cost excludes duplicate provisions but does not take into account interactions of the different provisions.

1 The passed bill sunsets after 2004 for procedural reasons. This estimate assumes the tax cut is permanent.

2 Senate version is $103 billion.

3 Passed as an amendment to estate tax repeal in the Senate and then stripped from the bill before final passage.

4 Passed in 1999 and currently in Conference. Senate version is $39 billion.

 

The Total Tax Cuts Passed By the 106th Congress Would Use $1.8 Trillion of the Surplus – At Least the Entire On-budget Surplus Over 10 Years

The Republicans have passed many of the pieces of the $792 billion tax bill the President vetoed last year; and they describe the bills they have passed this year as just a "down payment" on their ultimate goals. But they still have not passed the most costly elements, including across-the-board rate reductions. If the Republican Congress is still intent – this year or next – on these tax cuts, the total drain on the surplus from 2001-10 would be $1.8 trillion. This substantially exceeds OMB's projection of a $1.47 trillion on-budget surplus from 2001-10 and uses up the entire $1.81 trillion on-budget surplus in the Congressional Budget Office's more optimistic projections. This would risk our fiscal discipline and leave nothing for other priorities like a voluntary Medicare prescription drug benefit, paying down the debt by 2012, providing targeted tax cuts to help working American families with the costs of college, long-term care, child care, and raising larger families, and strengthening Social Security and Medicare. (These on-budget surplus estimates exclude Medicare surpluses, something that was proposed by the Vice President, endorsed by the President, and agreed to in principle by the Republican Congress.)

 

TOTAL TAX CUTS PASSED BY THE 106TH CONGRESS ($billions, 2001-10)

     
 

Cost

Passed By

     

Tax Cuts Passed This Year

$712

 
     

Tax Cuts Passed Last Year

   

Reduction in Tax Rates

$490

House and Senate1

Individual Alternative Minimum Tax

$1152

Conference Agreement

Corporate Alternative Minimum Tax

$14

House and Senate1

Capital Gains for Individuals

$57

House and Senate1

Capital Gains for Corporations

$8

House and Senate1

Interest Deduction on Worldwide Basis

$29

House and Senate1

Extend R&E Tax Credit

$183

House and Senate

Extend exemption for Subpart F AFI

$6

Conference Agreement

     

Total Cost (eliminating duplication)

$1,447

 

Added Interest

$349

 

Total Drain on Surplus

$1,796

 
     

Source: Cost estimates of individual bills are from Congress' Joint Committee on Taxation and total cost is based on an analysis by the Office of Management and Budget. The total cost excludes duplicate provisions but does not take into account interactions of the different provisions.

1 Cost estimate is from H.R. 2488 as passed by the House.

2 Excludes the cost of the provisions passed as part of this year's marriage penalty bill.

3 Cost estimate is from H.R. 2488 as passed by the Senate excluding the cost of the 5-year extension enacted in 1999. The Senate passed this again this year as an amendment to estate tax repeal but then stripped it before final passage.

 

The Major Tax Cuts Passed By the House This Year Would Provide As Much to the Top 1 Percent of Taxpayers as the Bottom 80 Percent

According to an analysis by the Department of the Treasury of the major provisions passed by the House this year: estate tax repeal, marriage penalty, limit increases for pensions and IRAs, and other tax cuts. (This analysis does not include the Conference-agreement marriage penalty just passed by the House and the Social Security benefit taxation just passed by the House Ways and Means):

 

President Clinton's Targeted Tax Cuts Would Provide More For Most Families At a Much Smaller Total Cost

President Clinton has proposed tax cuts totaling $263 billion over 10 years. This fiscally responsible tax package would deliver more benefits to more families than the much larger Republican tax package:




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