Citing the latest Congressional Budget Office deficit report, Senator Chuck Grassley has argued that the Bush tax cuts have not eaten into the revenue base and are not the cause of rising deficits.
Grassley, Chairmand of the Senate Finance Committee, said that the revenue baseline for financial years 2006 to 2010 will average 18.3% of the Gross Domestic Product. This would be a post-World War II historic average.
This would mean that once the 2001-2003 tax relief plans are in full effect, the revenue base will have been sustained in historic terms.
"It's pretty obvious that the critics of tax relief will ignore this report because it refutes their point," he commented in a statement last week.
"The critics like to say tax relief guts the revenue base and causes rising deficits. But the report clearly doesn't support that assertation," he argued. "In fact, the report shows that positive revenue changes to the baseline in FY 2006 and FY 2007 budgets far exceeded the revenue loss from the reconciled and non-reconciled tax relief approved in this Congress. Spending is the problem, not tax relief."
The CBO currently predicts a deficit of $260 billion for fiscal year 2006. This is $111 billion less than estimated in March, partly because of higher-than-expected tax revenues from strong coporate profits.
However, the CBO warns that making the cuts permanent could cause the gap between spending and tax revenues to rise.
The current forecast shows the 2007 deficit to increase to $286 million. The deficit could total $1.76 trillion over the next decade. Extending tax cuts through 2016 currently pushes the estimate to an additional $2.2 trillion. Enacting a permanent reform to the Alternative Minimum Tax could push the deficit even higher, to $3.26 trillion over the next ten years, the CBO report stated.