Levin -- CBO Report Shows Small Economic Impact of Ending Tax Breaks for Highest Earners
WASHINGTON, DC – Ways and Means Ranking Member Sander Levin (D-MI) issued the following statement today on the Congressional Budget Office Report showing the economic impact of the “fiscal cliff.”
Ways and Means Ranking Member Sander Levin:
“The CBO report makes clear that Congress must complete the unfinished business facing the nation right now to avoid the fiscal cliff that would threaten our economic recovery.
“Importantly, the CBO report undermines the Republican argument on tax cuts for the very wealthiest by showing that they have only a miniscule effect on economic growth while adding nearly a trillion dollars to the deficit over the next decade.
“House Republicans must end their intransigence on tax cuts for the very wealthy and sit down on a bipartisan basis to finish the work of this Congress. We should do so by taking steps to address the time-sensitive end-of-year tax issues, unemployment insurance, Medicare reimbursement and preventing the sequester for a full year. These vital steps will allow the new Congress to set a course for deficit reduction and tax reform in a transparent and fully bipartisan fashion.”
Read the full report here.
Summary of CBO Report on Fiscal Cliff
The CBO estimates that allowing all of the fiscal tightening that is scheduled to occur in 2013 and 2014 will reduce GDP by 2.9 percent in the fourth quarter of 2013 and employment by 3.4 million.
Today’s report clarifies that of the fiscal cliff’s economic impact:
- 0.4 percent of GDP and 400,000 jobs are attributable to defense spending cuts required by the Budget Control Act.
- 0.4 percent of GDP and 400,000 jobs are attributable to nondefense spending cuts required by the Budget Control Act and the scheduled reductions in Medicare physician payments.
- 1.3 percent of GDP and 1.6 million jobs are attributable to the expiration of the middle class portion of the Bush Tax Cuts and the increased impact of the AMT.
- 0.1 percent of GDP and 200,000 jobs are attributable to the upper income Bush Tax Cuts – the portion that applies to income above $250,000. The upper income tax cuts that Republicans are holding up middle class tax cuts over represent 3.4 percent of the Fiscal Cliff’s impact on economic growth and 5.8% of its impact on jobs.
- 0.7 percent of GDP and 800,000 jobs are attributable to the expiration of the payroll tax cut and extended unemployment insurance benefits.
Relevant Passages of CBO Report
“Extending all expiring tax provisions other than the cut in the payroll tax and indexing the AMT for inflation—except for allowing the expiration of lower tax rates on income above $250,000 for couples and $200,000 for single taxpayers—would boost real GDP by about 1.25 percent by the end of 2013. That effect is nearly as large as the effect of making all of those changes in law and extending the lower tax rates on higher incomes as well (which CBO estimates to be a little less than 1.5 percent, as noted above), primarily because the budgetary impact would be nearly as large (and secondarily because the extension of lower tax rates on higher incomes would have a relatively small effect on output per dollar of budgetary cost).”