Irresponsible tax cuts for millionaires to go into effect

The Center on Budget and Policy Priorities (CBPP) lays out the sad implications of the new tax cuts in this extremely informative report released on December 28:

Sometime early next year, the House of Representatives is expected to vote on the budget reconciliation legislation that the Senate passed on December 21 and the House passed in a slightly different version on December 19. That legislation would make significant cuts in a number of programs serving low- and moderate-income families and individuals, including Medicaid, child support enforcement, and student loans.

Supporters of the legislation defend the cuts as “tough choices” that need to be made because of large and growing budget deficits. These claims are undercut by the fact that, in the last six weeks, the House has passed four tax-cut bills that together cost more than twice what the budget reconciliation bill saves. The claims are further undermined by Congress’s unwillingness to rethink any previously enacted tax cuts as part of its supposed reevaluation of priorities in light of deficits.

In particular, Congress has chosen to allow two tax cuts that exclusively benefit high-income households — primarily millionaires — to begin taking effect on January 1, 2006. By 2010, these tax cuts will eliminate two current provisions of the tax code that limit the value of the personal exemptions and itemized deductions that people at high income levels can take (see box below for more detail).

Two importsnt points about these tax cuts:

1. They will be very expensive. In fact: “The cost of these two tax cuts between 2005 and 2010 exceeds the savings from all of the reductions in low-income programs in the reconciliation bill over the same period. In other words, if Congress halted the implementation of these two tax cuts and eliminated all of the low-income program reductions, there would be a net reduction in the deficit.

and,

2. Only top earners will benefit. “More than half of the gains from the two tax cuts — 54 percent of them — will go to the 0.2 percent of households with annual incomes above $1 million, while 97 percent of the tax-cut benefits will go to the 4 percent of households with incomes above $200,000, according to the Urban Institute-Brookings Institution Tax Policy Center.”

The link above is definately worth checking out, as it provides several informative tables and charts.