WASHINGTON -- The Concord Coalition said today that it would be premature to permanently extend the estate tax repeal or any other provision of last year's tax legislation before a broader fiscal policy agreement is reached between Congress and the Bush administration.
“Last year's tax bill was approved on the assumptions that the nation would not be at war, that the Social Security surplus could still be set aside, and that even with a $1.3 trillion tax cut the public debt would be virtually eliminated by the end of the decade -- before the Baby Boomers' retirement and health care benefits become a major drain on the budget. All of those assumptions were wrong. A logical response to such dramatically changed circumstances would be to reassess whether the entire tax cut plan should be phased in over the next several years as scheduled,” said Robert Bixby, Executive Director of The Concord Coalition.
Concord noted that even a fiscally prudent response to the new security environment will result in substantially higher spending than was anticipated last year. The President's budget appropriately states, “Achieving our homeland security objectives will require vast sums of money, strenuous labor and many years.” Defense and homeland security proposals have already added about $650 billion of new expenses to the President's budget over the next 10 years and more could result from the proposal to create a new Department of Homeland Security.
“The proponents of removing the tax cut sunset are correct that the absurd results of this provision must be dealt with at some point. But the sunset provision serves a very useful purpose -- it is the ultimate ‘trigger.' As events unfold over the next year or two, and we see whether deficits are as short term and modest as the President hopes, it may make sense to adjust the phase-in of tax cuts accordingly -- perhaps extending some of them permanently while limiting or delaying the effect of others. With deficits back, the Boomers scheduled to begin receiving entitlement benefits in just six years and the upper level of future spending on national security still very uncertain, what is needed more than extended tax cuts is a new long-term fiscal policy plan. In the absence of any such plan it is likely that Congress and the President will continue spending the Social Security surplus and running up the debt. Removing the tax cut sunset should only be done after much more difficult decisions have been made,” said Bixby.
The Concord Coalition is a nonpartisan, grass roots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Former U.S. Senators Warren Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president.