■The Bush tax cuts have contributed to[U] revenues dropping in 2004 to the lowest level as a share of the economy since 1950,
and have been a major contributor to the dramatic shift from large projected budget surpluses to projected deficits as far as the eye can see.[/B]
■The tax cuts have conferred the most benefits, by far, on the highest-income households — those least in need of additional resources — at a time when income already is exceptionally concentrated at the top of the income spectrum.
■The design of these tax cuts was ill-conceived, resulting in significantly less economic stimulus than could have been accomplished for the same budgetary cost. In part because the tax cuts were not as effective as alternative measures would have been, job creation during this recovery has been notably worse than in any other recovery since the end of World War II.
If the Administration’s latest tax proposals — which would make permanent most of the tax cuts enacted in 2001 and 2003 and establish new tax cuts on top of that — are enacted, the long-term results are likely to be even more troubling. Over the next 10 years, total tax-cut costs will equal $3.9 trillion, reaching nearly $600 billion or 3.3 percent of the economy in 2014 alone. (These calculations include the effects of the higher interest payments caused by the tax cuts.) The resulting higher deficits will slow future economic growth, saddle future generations with sizable interest payments, and leave the nation ill-prepared not only for the retirement of baby boomers but also for responding to potential future crises — from security matters to natural or environmental disasters — the particulars of which are unknown today.
Pressure to reduce these deficits will mount. Because the tax cuts are so tilted toward the highest-income households — and become even more so over time, as some of the upper-income tax cuts phase-in — the burden of financing these lopsided tax cuts ultimately is likely to be borne disproportionately by households who gain only modestly from the tax cuts.
This will be the case unless offsetting spending cuts or tax increases are enacted that reduce benefits or raise taxes primarily on high-income households.
As a result, over the long term most Americans may well be net losers from the tax cuts.