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Budget Rule Change Would Make The Cost Of Extending The Tax Cuts Disappear

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The President’s 2005 budget includes a legislative proposal to change the budget rules so that the cost of extending the 2001 and 2003 tax cuts would be incorporated into the official budget “baseline.” Under existing rules, the baseline is required to reflect current law and thus shows the tax cuts expiring. As a result, official estimates by the Congressional Budget Office, the Joint Committee on Taxation, and the Treasury Department all show proposals to extend these tax cuts as having large costs. If the Administration’s proposed change to the baseline rules is implemented, however, the official estimates would show proposals to make the 2001 and 2003 tax cuts permanent as having zero cost.