Nov. 15, 2005 – Working toward final reconciliation with the Senate for the 2006 budget, the Ways and Means Committee of the United States House of Representatives is holding a budget markup session today that will consider tens of billions in tax cuts that many economic analysts say favor the wealthy at the expense of programs for low- and middle-income people. The budget push follows last weekâ€™s failure to pass the measure before the Veteransâ€™ Day holiday.
Though there is no official estimate of the House budget proposalâ€™s costs, economists, politicians and news outlets peg it at around $50 billion dollars, $15 billion more than the Senate approved in its version of the budget last month. The cost could even top $60 billion, the Center on Budget and Policy Priorities (CBPP), a progressive economic think tank, noted in an analysis released yesterday
According to the CBPP, a surprise decision by Ways and Means Chair Bill Thomas (R-California) to pull the widely supported Alternative Minimum Tax relief in favor of capital-gains and dividend tax cuts could mean another round of tax cuts later this year, likely deepening the record federal deficit. ,The Alternative Minimum Tax (AMT) provision, which is intended to counter some loopholes used for tax avoidance, is set to expire at the end of the year,
Previously, Thomas indicated that Congress would have to either extend the AMT or the capital gains and dividend cuts, and maintains that the former favors the wealthy more than the latter, a contention the CBPP refuted in yesterdayâ€™s report.
"Although both of these tax-cut provisions generally benefit upper-income households â€” with close to 95 percent of the benefits of both tax cuts going to the top 20 percent of households â€” the benefits of the capital gains and dividend tax cuts are far more skewed to the highest-income households than AMT relief," the CBPP said, citing figures compiled by the joint Urban Instituteâ€“Brookings Institution Tax Policy Center.
The moderately liberal Tax Policy Center projects that capital gains and dividend cuts would disproportionately go to the "super rich," those with incomes above $500,000 a year. Households with incomes above $1 million would receive over half of the total benefits under Thomasâ€™s proposal.
Mainstream support for continued AMT relief is high, since the provision, which is supposed to ensure that wealthy people employing tax avoidance schemes pay some federal income tax, is projected to bring an even greater number of middle- and upper-middle income households under its purview, CNN noted last week.
The centrist Brookings Institution expects the AMT to affect about one-third of all taxpayers by the end of the decade, and many politicians and establishment think tanks have been calling for its repeal for the past several years. The Congressional Budget Office found that the increasing reach of the AMT is due to the fact that it is not indexed to inflation, unlike traditional income tax.
According to the Economic Policy Institute, tax cuts and other changes to the federal tax code have cost the federal government over $900 billion since 2001, yet failed to lift the economy by most determinants relevant to working Americans, such as job figures and real wages.