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Wednesday, June 30, 2004

Kerry Proposes Massive Tax Cut

Did you know that John Kerry's tax proposals, taken in total, amount to a tax cut of $617 billion dollars over ten years? That's the conclusion of an analysis by Urban Institute economist Leonard Burman.

Current law calls for all of Bush's tax cuts to expire by 2010. Kerry has proposed making the "middle-income" tax cuts permanent ("middle income" means less than $200,000 a year). He's also called for $230 billion in tax credits for college expenses and health care. Offsetting the cuts, he plans to repeal Bush's tax cuts for the rich.

This is probably news to you (it was news to me), because the press isn't presenting it that way. To take one example (and I'm sure I could find dozens), Ceci Connolly and Jonathan Weisman, writing in the Washington Post say:

As they prepare for the fall general election, President Bush and Sen. John F. Kerry are presenting voters with a clear choice between tax cuts and expanded health care coverage....Bush has committed...about $990 billion over a decade for making permanent the array of tax cuts enacted in 2001 and 2003.

Notice first that Kerry's health care plan is not presented as a tax cut, even though a big chunk of it is in the form of credits that will reduce tax bills.

More importantly, Bush is said to be cutting taxes by $990 billion by making the cuts permanent for both middle and upper-income taxpayers. Kerry similarly proposes to make the middle-income tax cuts permanent, but the Post doesn't describe this as a tax cut (or even mention it).

Kerry is actually said to be increasing taxes by $860 billion. But if you read Burman's report carefully (it's one of the sources for the Post article), this isn't true. Actually, Kerry is just proposing cutting taxes by $860 billion less than Bush.

(By the way, I know the numbers I presented don't add up. The main reason is that Kerry's $860 billion tax "increase" is compared to a realistic estimate of the cost of the Bush proposals, which is bigger than $990 billion).

I don't mean to say that I necessarily think Kerry's tax cut proposal is wise in the face of the current budget deficit: I'm not familiar enough with Kerry's overall plan to know what it will do to the deficit. But what Kerry is actually proposing is a big tax cut.

 Kerry Tax Proposals: 

10-Year Revenue Change Relative to Current Law
(2005-2014, billions of dollars)

Make middle class income tax cuts
permanent and repeal high-income tax cuts: -388
Modify estate tax: 0
College Opportunity Tax Credit: -52
Health tax credits
Small business: -67
Early retirees: -66
Workers between jobs: -44
Total Kerry Plan: -617 billion
Source: Urban/Brookings Tax Policy Center Analysis by Leonard Burman (table 2).

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