About a week ago, my friend Marc Thiessen ably dismantled claims by the Senate “Gang of Six” that their proposal would cut taxes by $1.5 trillion. As Marc explained, their plan actually called for a $3 trillion tax hike.
The reason for the $4.5 trillion disparity? Congressional Budget Office scoring. The CBO always assumes the continued viability of federal law, regardless of federal policy. So, even though no one in Washington thinks the Bush tax cuts will actually be allowed to lapse (certainly not for all taxpayers, and probably not for “the rich”), CBO credits the government with an additional $3 trillion in tax revenue that will never materialize because the law says so. The alternative minimum tax (AMT) is always “patched” as a matter of policy to ensure that millions of taxpayers are not otherwise caught in its web; but because AMT is the law, the CBO assumes no patch and that these taxpayers will purportedly fork up close to $660 billion. There are also various popular tax credits and adjustments (e.g., the research and development credit) that are due by law to sunset at the end of the year, but “tax extender” legislation stops that from happening — a policy the CBO ignores, assuming another illusory $750 billion for stuffing into Uncle Sam’s coffers.
Using the usual Washington budget shenanigans, the Gang of Six tried to con Americans into thinking that what everyone knows to be the fictional CBO numbers were real. Those numbers call for this imaginary $4.5 trillion in taxes, which the Gang purported to reduce by an imaginary $1.5 trillion (mainly by slashing fictitious AMT taxes and granting relief from taxes that would have been relieved anyway by tax extenders). The six senators thus patted themselves on the back for a $1.5 trillion “tax cut” … even though their repeal of the Bush tax-cuts would actually increase taxes by $3 trillion over the next ten years.
I point all this out because, like the Gang of Six, Speaker Boehner is working off CBO numbers. I am assuming they are the same CBO numbers for the Speaker as for the Senators. So my question for our budget wonks is: Does the Boehner plan, like the Gang of Six plan, assume the repeal of the Bush tax cuts, the applicability of the AMT with no patches, and the elimination of popular tax credits?
If so, that would seem very odd. As I understand it, Speaker Boehner supports continuation of the Bush tax cuts, the AMT patch, and the tax extenders. Is he offering a plan basic parts of which he opposes? And let’s pretend that the Boehner plan, as falsely advertised, actually did cut the deficit by $1.2 trillion (instead of $851 billion scored by the CBO, which, of course, found real cuts of only $1 billion next year and $16 billion in 2013 — the only two years this Congress can actually control). Let’s even suspend disbelief and assume that the blue-ribbon congressional commission the Speaker would punt to in Phase II actually finds another $1.8 trillion in deficit reduction without tax hikes that everyone agrees to. Even if all those things happened, would it be wrong to conclude that if, as expected, the Bush tax cuts are extended, the AMT is patched, and the other credits are continued, this would more than wipe out the purported $3 trillion in deficit reduction Speaker Boehner claims to achieve?