FOR THE RECORD: ECONOMY
"Some in Washington argue that letting tax relief expire is not a tax increase. Try explaining that to 116 million American taxpayers who would see their taxes rise by an average of $1,800. . . . This budget will keep America on track for a surplus in 2012."
ANALYSIS: Bush makes the potential expiration of his tax cuts sound like a big deal for the average American, but his estimate of the financial impact is skewed because the cuts have disproportionately helped the very richest citizens. That fact boosts the average cost of reinstating the taxes, a circumstance that doesn't reflect what the typical household might experience.
Here's another way of looking at it: the median American household will pay roughly $828 more in taxes in 2011 if the Bush tax cuts expire, according to the Tax Policy Center, a non-ideological think tank venture. The richest 1 percent of American households, in contrast, would have to pay an extra $64,154 a year when the tax cuts expire.
With the economy slowing, the Congressional Budget Office this month projected that the federal budget deficit would actually grow worse this year, not better. In predicting that a surplus will return in 2012, moreover, Bush is not counting the long-term cost of the wars in Iraq or Afghanistan, nor is he taking into consideration likely congressional action to mitigate the expansion of the alternative minimum tax, which increasingly threatens the middle class.
Bush's 2008 budget accounted for the cost of holding the AMT at bay for just one year. Congress obliged, with an AMT measure that cost the Treasury $50 billion. Bush has said the AMT should be repealed only when the tax code is broadly overhauled, a goal he did not mention last night.
The administration has repeatedly underestimated the costs of the wars. In 2009, it has budgeted $70 billion, only one-third the cost this year.
-- Steve Mufson and Jonathan Weisman