President George W. Bush's tax cuts may well wind up the biggest legacy of the Bush administration. Their fiscal impact on the nation and New York has already reached startling proportions. For example, Citizens for Tax Justice, a research and advocacy group founded in Washington D.C. 25 years ago, estimates that the tax cuts, along with the massive borrowing needed to pay for the cuts and increased defense spending, will add $3.8 trillion to the national debt over six years. New York State's share of that new debt will be about $260 billion.
The tax benefits to individuals are huge -- over six years the country's taxpayers will receive over $1 trillion in tax cuts, with New Yorkers receiving about $78 billion of that. But the money goes disproportionately to the richest Americans, dramatically increasing an already large gap between the rich and non-rich in the nation and especially in New York.
Since the rich are less likely to spend their savings than lower-income Americans, the tax cuts will not stimulate the economy, according to the Citizens for Tax Justice. In addition, the new debt-related expenses and lost revenues will create major federal budget problems.
TAX CUTS AND THE $10 TRILLION PROBLEM
The Bush tax cuts began in 2001, with lowered federal tax rates and the expansion of several different tax benefits over 10 years. As the Tax Policy Center recounts, in 2003 Bush pushed through Congress a new round of tax cuts, introducing capital gains and dividend tax breaks. He also succeeded in accelerating several provisions of the 2001 tax cuts, such as tax rate reductions, marriage penalty relief, and the child tax credit.
It is the collective impact of these tax cuts that Citizens for Tax Justice traces for national and state impacts. The additional $3.8 trillion deficit by 2007 is just the beginning. In another study (in pdf format), Citizens for Tax Justice uses data from a Congressional Budget Office report to project an annual federal budget deficit of over $1 trillion a year by 2013.
That adds up to a tripling of the national debt a dozen years after George Bush took office, from $4.5 trillion to $14.1 trillion. Thus Bush would be accountable for almost $10 trillion in new debt. (These estimates are far higher than those by the Bush administration, because their assumptions are different. They assume, for example, that projected expenditure cuts won't happen, and that tax cuts will not "sunset.")
In the shorter term, according to Citizens for Tax Justice, the first four years of the Bush term will add up to $2.3 trillion in deficit spending, two-fifths of which is attributable to the tax cuts, and most of the rest to the "lousy economy."
NEW YORK BENEFITS AND BURDENS
Citizens for Tax Justice has analyzed both the benefit and burden of the Bush tax cuts. The New York data is statewide (although New York City is obviously a significant part of that data, both on the upper and lower ends of income).
Because the tax cut is entirely paid for by borrowing, the new debt burden becomes a significant problem - an average net burden of about $9,450 per person, or $37,826 for a family of four.
But it is the disproportion of the tax benefits in New York State that is most striking. New Yorkers in the top one percent of wealth (with an average income of more than $1.4 million) will get more than a third of the benefits this year, and more than half by 2007; they are promised an average tax savings of $81,308 this year. By contrast, the poorest 20 percent in the state will get less than one percent of the benefit; these poorest New Yorkers are promised an average tax savings of just $72 this year. The middle 20 percent (those with an average income of $35,000) are promised $793 this year.
While the wealthiest will get more and more, everybody else will get less and less. Citizens for Tax Justice points out that President Bush was misleading in saying of his 2003 round of tax cuts that it represented, "on average, a tax cut of $1,126" a year. Most New Yorkers will get far less:
Â· In 2003, 52 percent of New Yorkers will get less than $100.
Â· By 2006, 87 percent will get less than $100.
FEDERAL TAX CUTS OFFSET CITY AND STATE TAX INCREASES
Over the six-year period, there will nevertheless be an average of $13 billion of tax savings a year for New York State residents. Using New York State Department of Taxation and Finance data for 1999 (latest available) we can make a rough estimate that some 40 percent of those savings will go to New York City residents.
(In 1999, nearly 40 percent of the total New York State adjusted gross income of $400 billion reported to the department was from New York City residents. And the 71,408 New York City taxpayers who reported income over $200,000 in 1999 represented 38 percent of all state taxpayers over that income level.)
One important result of these high-income federal tax savings is that they soften the impact of recent increases in city and state taxes, which are deductible on federal returns. In one example, in a July 2003 report (in pdf format), State Comptroller Alan Hevesi said the 2003 federal tax cuts alone would save city taxpayers approximately $3.2 billion. These savings would offset the impact of 2003 rate increases in state and city personal income taxes for married couples filing jointly with adjusted gross incomes over $200,000. Thus:
Â· Couples earning $200,000 had a net tax savings of $1,942.
Â· Couples earning $250,000 had a net tax savings of $3,152.
Â· Couples earning $600,000 had a net tax savings of $10,479.
FEDERAL DOMESTIC SPENDING STALLS
Bush tax cuts have not been offset by spending cuts. But the pressure on domestic spending is apparent in the current federal budget.
A new report by the Center on Budget and Policy Priorities shows that over the past three years discretionary domestic spending, as well as defense, homeland security, and international spending have all increased - if at quite different rates. In fact, in the past year, domestic spending has stalled. Assuming that the Senate in January passes the omnibus spending bill passed by the House of Representatives in December:
Â· Defense, homeland security, and international affairs will show huge increases -- from $345 billion in 2001 to $534 billion in 2004.
Â· Domestic discretionary programs outside homeland security show small gains -- from $336 billion in 2001 to $389 billion.
However, domestic spending actually declined, according to the Center on Budget and Policy Priorities. When adjusted for inflation, the $389 billion planned for 2004 domestic spending is actually $7 billion less than in 2002, a decrease of two percent.
PUTTING EDUCATION, HOUSING, HEALTH, ETC. AT RISK
The Bush tax cuts, then, will transfer over $1 trillion over six years from the federal treasury to the nation's taxpayers, primarily to the wealthiest Americans. A substantial share of that transfer will go to wealthy New Yorkers and will offset to some degree recent state and city tax increases.
The huge tax revenue loss is compounded by the decision by the president and the Republican Congress to fund the tax cuts through borrowing. All this, plus a slumping economy and a huge increase in defense spending, adds up to nearly $4 trillion in federal budget deficits from 2002 to 2007.
Because of the Republican willingness to gamble on deficit spending to fund tax cuts and an expanding engagement in the Middle East, pressures to limit or cut domestic spending are likely to increase, an ominous prospect for a New York City whose economic recovery lags behind the nation's own slow recovery.
The real cut in federal domestic spending since 2002 is a disturbing sign that federal assistance for New York City in such areas as education, housing, transportation, the environment, health, and economic development is at risk because of the Bush tax cuts and other Republican priorities.
Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.I did just say that cardiovascular substrate abused medications. http://trytadalafil40mg.us I know of bit in the hour that took a economy in another software with a troubled libido, n't he sold his grad and moved his quality.
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