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US Debt Ceiling Deal Includes Future Tax Hikes,
by Leroy Baker, Tax-News.com, Washington
Monday, August 08, 2011
In a recent paper, the President of the Tax Foundation, Scott A. Hodge, points
out that the latest United States debt ceiling agreement contains a built-in
USD3.5 trillion revenue increase, despite all political protestations that it
does not raise taxes.
“One of the least reported facts about the 11th hour debt limit deal
between the White House and Congressional leaders,” he writes, “is
that it assumes that on January 1, 2013 virtually every working American will
begin paying much higher taxes than they are today.”
Hodge explains that all US budget projections are based on the "current
law" baseline that assumes that all of the Bush-era tax laws expire as
scheduled after December 31, 2012 - “this means that all income tax rates
will go up across the board, the child credit will fall from USD1,000 to USD500,
the marriage penalty will return. Moreover, the current law baseline also assumes
that the alternative minimum tax will not be ‘patched’ and will
affect tens of millions of unsuspecting taxpayers.”
“Under this baseline scenario the federal government is estimated to
collect USD39 trillion in tax revenues over the next ten years,” he concludes.
“So by assuming taxes have already gone up lawmakers can say that they
have not, ‘technically’, increased taxes.” In fact, if all
the tax policies that are currently in place were extended for the next ten
years, only USD35.5 trillion, or some 10% less, would be raised in revenues
over the same period.
Hodge adds that federal spending was expected to total nearly USD46 trillion
over the next ten years. The compromise plan would reduce that by a planned
USD2.4 trillion, which would amount to an overall spending cut of only 5.2%.
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