Paul L. Caron

Tuesday, April 25, 2006

Joint Tax Committee Releases Estimates of Federal Tax Expenditures for 2006-2010

BluebookThe Joint Committee on Taxation today released Estimates of Federal Tax Expenditures for Fiscal Years 2006-2010 (JCS-2-06):

Part I of this report contains a discussion of the concept of tax expenditures.  Part II is a discussion of the measurement of tax expenditures.  Estimates of tax expenditures for fiscal years 2006-2010 are presented in Table 1 in Part III.  Table 2 shows the distribution of tax returns by income class, and Table 3 presents distributions of selected individual tax expenditures by income class.

The Center on Budget and Policy Priorities has issued a critical report, Joint Tax Committee Estimate Shows that Tax Gimmick Being Designed to Evade Senate Budget Rules Would Increase Long-Term Deficits:

House and Senate conferees negotiating an agreement on the tax reconciliation bill are widely reported to have decided to use a change in Roth IRAs to help “offset” the cost of capital gains and dividend tax cuts in years after 2010. If the tax reconciliation bill increases the deficit after 2010, it would violate a Senate rule that a reconciliation bill may not increase long-term deficits, and the bill would be subject to a 60-vote point of order on the Senate floor. The Roth IRA provision, in conjunction with other provisions, is supposed to address this problem.

New estimates by the Joint Committee on Taxation show, however, that the Roth IRA proposal is a gimmick — while it would raise revenues in the first few years it was in effect, it would produce sizeable revenue losses in the years after that (see the Figure below and the Joint Tax Committee document below). The new Joint Tax Committee estimates confirm that the proposal represents a flagrant deception, under which conferees would seek to create an illusion they were not increasing long-term deficits when in fact that would be precisely what they were doing.

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