The Tax Fairy, Debunked

Thursday, November 15, 2007

TAX CUTS don't pay for themselves. This might sound like dog-bites-man news, except for one thing: This rather unremarkable statement comes from Jim Nussle, the new director of the Office of Management and Budget in an administration whose president is given to saying things like "You cut taxes, and the tax revenues increase" (February 2006) and "We have cut taxes, causing economic growth, which caused there to be this year alone 187 billion more tax dollars coming into the Treasury" (August 2007).

As Mr. Nussle acknowledges, "There are those including myself who . . . in the passion of the argument have made statements -- I think I even made a statement once -- that tax relief did pay for itself." In fact, Mr. Nussle said yesterday at a breakfast with reporters sponsored by the Christian Science Monitor, "Some say that [the tax cut] was a total loss. Some say they totally pay for themselves. It's neither extreme."

This is not a merely academic debate, although no serious academic, including Mr. Bush's own economists, has argued that tax cuts produce enough additional economic growth to make up for lost revenue. Congress is debating whether a proposed $50 billion-plus "patch" exempting millions of taxpayers from the alternative minimum tax should be paid for, as Democrats have argued, or can simply be added to the national credit card bill, as congressional Republicans prefer. "Tax relief pays for itself," House Minority Leader John A. Boehner (R-Ohio) declared this month, explaining why no one should fuss about another $50 billion.

Asked whether the administration believes the AMT patch should be paid for, Mr. Nussle noted that President Bush proposed entitlement cuts when he submitted his budget in February. But of course there is no appetite in Congress for making such cuts, and the president -- in pressing Congress to act on the AMT patch in a speech in Indiana on Tuesday -- made no mention of them.

"Preventing a tax increase in one area should not be an excuse for raising taxes in other areas," Mr. Bush said. "Congress should eliminate the tax increases in the bill and send the AMT relief to my desk as soon as possible. That's what the American taxpayer expects." Indeed, that's the kind of free lunch American taxpayers have gotten accustomed to from this administration. If tax cuts don't pay for themselves, though, the administration and its congressional enablers need to explain: Who is going to foot the bill, those enjoying the benefits of the patch or their grandchildren?

© 2007 The Washington Post Company