CBO Provides New Evidence That the 2001 and 2003 Tax Cuts Have Only Modest Economic Effects and Do Not Pay For Themselves

Publication Date: April 2007

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Chad Stone

Research Area: Banking and finance

Keywords: Economic projections; Fiscal future; Tax code; Federal budget

Type: Report

Abstract:

A new analysis by the Congressional Budget Office finds that extending the 2001 and 2003 tax cuts could result in a modest increase in the number of hours that people work. However, any “dynamic” revenue gains associated with the resulting increase in wages and salaries would pale in comparison with the cost of extending the tax cuts. Those findings should not be surprising because they are consistent with earlier dynamic analyses of tax cuts by CBO, the Joint Committee on Taxation (JCT), and even the President’s own Treasury Department. Claims that tax cuts pay for themselves or that standard estimates of the cost of tax cuts are substantially overstated fly in the face of the accumulating evidence from studies such as these.