CONCORD COALITION WARNS THAT TAX CUT “SUNSET” GIMMICKS SHIFT THE BURDEN OF HARD CHOICES TO THE FUTURE

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WASHINGTON
With the Senate expected to vote today on a proposal to phase out
dividend taxation over four years and then "sunset" the provision so that
dividends would suddenly be taxed again in 2007, The Concord Coalition said that
the use of “sunsets” to artificially reduce the revenue loss estimates of tax
cut proposals is an expensive and irresponsible gimmick that future generations
will have to pay for.

 

WASHINGTON
With the Senate expected to vote today on a proposal to phase out
dividend taxation over four years and then "sunset" the provision so that
dividends would suddenly be taxed again in 2007, The Concord Coalition said that
the use of “sunsets” to artificially reduce the revenue loss estimates of tax
cut proposals is an expensive and irresponsible gimmick that future generations
will have to pay for.

 

“There is absolutely no economic or fiscal policy
justification for the idea of phasing out and then reinstating the taxation of
dividends. Any anticipated positive economic effects from eliminating the
taxation of dividends will be muted, if not canceled out, by the looming sunset.
On the other hand, if one assumes that the sunset doesn’t happen then the cost
of the provision balloons. In short, this idea is either bad economics or
dishonest budgeting,” said Concord Coalition Executive director Robert Bixby.

 

“The obvious intent of such a blatant scoring gimmick is to
pretend that a tax cut with an estimated revenue loss of about $400 billion over
10 years will only lose about one-third as much revenue. Using this device,
proponents can take credit for eliminating the double taxation of dividends
while technically, if disingenuously, staying within the $350 billion cap set in
the budget resolution for the Senate’s tax bill. Even some of the reported
“offsets” in this amendment are nothing more than new sunsets for other tax
cuts. Gimmicks are thus being used to offset gimmicks. It is a measure of how
far fiscal discipline has slipped that the Senate would even consider such
hocus-pocus in the wake of the Enron accounting scandal,” Bixby said.

 

“To be clear, the Senate is not alone in making use of the
sunset gimmick. The House version of the reconciliation bill contains several
new sunsets that artificially hold down its official cost. Moreover, any new
sunset gimmicks enacted this year will add to the $1.2 trillion 10-year cost of
permanently extending all the tax cut sunsets already enacted. These sunsets
confuse the fiscal outlook and complicate the tax code. Worst of all, they
cynically avoid facing up to the fiscal consequences of today’s decisions,
leaving future generations to clean up the mess,” Bixby said.

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