My take on the tax plans is really nothing new. And althought I have some very detailed compare and contrasts of the candidates plans, the majority of the items are not super impactful and are more detail than is necessary or people would even read here since there were written as tax planning guides for tax professionals under each plan. Of course the Obama one is much much more detailed since Romney has given no indication as to how he would "balance" out his plan.
So, I'll still with the broad provisions.
Let certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 and JGTRCA of 2003 (Bush Tax Cuts) expire.
Before the Bush Tax cuts were enacted, the CBO projected rising government SURPLUSES - from 2.7%-5.3% of GDP by 2011. That would have meant a $80 billion surplus in 2011 alone, based on the actual GDP from 2011 for the U.S. There are some variables to the projection, but the projection takes into account the biggest drivers of entitlement. In 2008 (with the recession getting underway), the CBO's projection, should the full bush tax cuts be allowed to expire, was deficits through 2011, but a return to SURPLUSES by 2012-2013, two years after the expiration of the tax cuts.
In 2011, with the depth of the 2007-2008 recession realized, the CBO revised its projections should the tax cuts expire and should they be extended. Currently, GDP as a percentage of the national debt is about 65%. This is important as the growth in the debt must obviously be reigned in and percentage of GDP allows measurement relative to the size of our economy. For historic perspective, debt as a percentage of GDP peaked at 109% at the height of WWII. Excluding the WWII spike, debt as a percentage of GDP has ranged from 25%-75% since the Great Depression. For further perspective France is sitting at about 85%, Germany about 70%, the UK 60% (although I have seen as low as 50% as well), and Italy 110%. Below 60% is generally seen as manageable, above 90% is a serious problem that will adversely affect growth creating the potential for a downward spiral without drastic action.
(any economists can chime in, but that is my very broad understanding)
Scenario 1 - Expiration of the Bush Tax Cuts
Debt increases to 84% of GDP by 2035 and levels off by then.
Scenario 2 - Bush Tax Cuts extended (basically indefinitely)
Debt/GDP reaches 109% by 2023 (similar to the peak of WWII) and 190% by 2035 at the low end if economic growth is not hampered at all by the percentage exceeding 90% around 2020. If economic growth is hampered (as would be expected), the CBO projects the ratio could reach 250% by 2035.
So, there is my case for not extending the Bush Tax Cuts. They have NOT been shown to have contributed substantially to GDP growth and they significantly reduce tax receipts. The CBO is non-partisian and other nonpartisian groups have concurred that the bush tax cuts will continue to SIGNIFICANTLY add to the national debt (because they do not result in a corresponding level of growth). Even GOP funded studies have all (every one I have read) stated the Bush Tax Cuts have not paid for themselves. And they will continue to get even more expensive as our debt grows.
And here is one additional quote:
The non-partisan Congressional Research Service has estimated the 10-year revenue loss from extending the 2001 and 2003 tax cuts beyond 2010 at $2.9 trillion, with an additional $606 billion in debt service costs (interest), for a combined total of $3.5 trillion.
Here is a comprehensive assessment of the Bush Tax Cuts: LINK
Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves--and were never intended to. Harvard professor Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005, even devotes a section of his best-selling economics textbook to debunking the claim that
In addition, Alan Greenspan advised against the additional 2004 cuts stating they would not add to economic growth as did many of Bush's own advisors.
Here is information from May 5, 2003 (that is extremely prophetic regarding the national debt and the debt ceiling, it is really good and the case was made 9 years ago):
Federal Reserve Board Chairman Alan Greenspan doesn't think that tax cuts are needed now and warns about the danger of growing budget deficits. (See this New York Times article). Recently, the International Monetary Fund issued its economic report that advised the US against passing more tax cuts. Hundreds of economists, including a number of Nobel Laureates, oppose tax cuts. According to a number of polls, most Americans don't want more tax cuts, either.
While the federal budget doesn't need to be balanced-it can go into debt, unlike the states, we do have a thing called the "debt limit." Congress set a limit on the total dollar amount of securities that the Treasury is allowed to have outstanding at any time. Congress must vote to increase the debt limit. Last June, less than a year ago, the limit was raised by $450 billion--from $5.95 trillion to its current $6.4 trillion. With the U.S. Treasury warning that the $6.4 trillion debt ceiling will be broached by the end of this month, another Congressional vote to raise the debt limit yet again will be required. The House has already approved a $1 trillion increase, after unsuccessfully proposing to just automatically enact a debt limit hike in connection with whatever budget it passes, i.e., "however much we want to spend, the debt limit will go up accordingly." The Senate may not be as generous, although it is certain the debt limit will be raised.
While the President frequently manages to say with a straight face that his tax cuts have nothing to do with the deficits/national debt (and often seems to completely defy logic and infer that the tax cuts will magically return us to surpluses), there should be no doubt that the tax cuts are a big reason for deficits -- not the only reason, but a big factor. According to a recent Center on Budget and Policy Priorities report, using Congressional Budget Office data, nearly one-third of the budget deterioration since 2000 has been caused by tax cuts enacted in the last two years. The CBO data also show that the share of the budget deterioration that is attributable to the tax cuts continues to get larger and larger each year over the course of the decade.
It should be embarrassing to vote to increase the debt limit in order to pay for trillions of dollars worth of tax cuts for corporations and the wealthy, even by a "little bitty" amount, no more than those "little bitty" billions that President Bush wants in tax cuts to which Congress seems unable to just say "No." LINK If you have made it this far, I could go into the substantial redistribution of income affects of the Bush Tax Cuts and link 6-10 more anaylsis of this, but I will skip that and say in summary, the Bush Tax Cuts need to go. At a very basic level, Obama's plan calls for AT LEAST a partial elimination (I want complete elimination).
Next up will be Romney's plan if you still want it (but you know where it will go by now)...