I'm Sorry

So sorry. If you’re quite wealthy, you will have to wait a week before you get your Christmas present from the president. I hope that doesn’t inconvenience you?

• Under the current tax code, there are limits on the value of the personal exemptions and itemized deductions that people at high income levels can take.  The two tax cuts scheduled to take effect in January would phase out these limits and repeal them entirely by 2010.   

• President Bush did not ask for these tax cuts.  Congress (A Republican Congress –Surprise!) added them to the 2001 tax-cut bill, which was enacted at a time when policymakers assumed budget surpluses would surpass $5 trillion over the coming decade. (What were they smoking?)

• The Urban Institute-Brookings Institution Tax Policy Center, says that a majority of the tax cuts from these two tax-cut measures — 54 % of these tax cuts will go to the 0.2 % of households that have annual incomes of more than $1 million a year.  These households will receive added tax cuts averaging nearly $20,000 a year from these two tax-cut measures, when the measures are fully in effect.

• 97 % of the tax cuts from these two measures will go to the 3.7 % of households that have incomes of over $200,000 a year. That leaves 3% to be spread out among 96.3% of the households. (That’s you and me) Virtually none of the tax cuts from these measures will go to families in the middle of the income range

• As noted, these tax cuts will phase in fully by 2010.  The Joint Committee on Taxation estimates they will reduce revenues by $9 billion in 2010, and by $16 billion in 2015.  The ten-year cost of these provisions in the first ten years that they will be fully in effect (2010 through 2019) will be $146 billion. When the interest payments on the debt of $51 billion are added, the cost rises to $197 billion over this ten-year period.

• These estimates understate the cost of the two tax cuts.  The estimates are based on Joint Tax Committee estimates that do not assume a continuation of relief from the Alternative Minimum Tax.  (A horror story on its own!) The Joint Tax estimates assume that a growing AMT will cancel out a portion of these tax-cut benefits, reducing their costs.  Most observers expect that AMT relief will be extended.  With AMT relief in place, these tax cuts will cost much more than the amounts shown here.

• Over time, the costs of these two tax cuts will exceed the costs of relief and recovery from Hurricanes Katrina, Rita and (insert name of disaster here.) This assumes that the tax cuts are extended beyond 2010, as the President has proposed.