CBO: Tax Hikes in 2013 Will Cause a Recession

By Matt Cover | August 22, 2012 | 10:47am EDT

CBO Director Douglas Elmendorf (AP photo)

(CNSNews.com) - The Congressional Budget Office (CBO) predicts that if tax rates rise in 2013 as scheduled, the economy will fall back into recession, shrinking by 0.5 percent in 2013.

CBO made the prediction in its annual summer budget update Wednesday.

“But the sharp increases in federal taxes and reductions in federal spending that are scheduled under current law to begin in calendar year 2013 are likely to interrupt the recent economic progress,” CBO said.

“By CBO’s estimate, that fiscal tightening will probably lead to a recession in 2013 and to an unemployment rate that remains above 8 percent through 2014.”

While CBO included mandatory spending cuts from the federal budget sequester (the “fiscal cliff”) in its analysis, the vast majority of the impact to the economy will come from the tax increases – the expiration of the Bush tax cuts -- due to their sheer size.

CBO estimated that the combination of spending cuts and tax increases would reduce the federal deficit by $487 billion in fiscal 2013, with the vast majority of that figure coming from tax increases.

CBO projects that if current tax policies are kept in place and do not expire in 2013 as scheduled, revenues would be $5 trillion less between 2012 and 2022.

Congress is not expected to address either the mandatory spending cuts or the expiration of the Bush tax rates until after the election.

 

 

CNSNews Reader,

The media are hard at work weaving a web of confusion, misinformation, and conspiracy surrounding the COVID-19 pandemic.

CNSNews covers the stories that the liberal media are afraid to touch. It drives the national debate through real, honest journalism—not by misrepresenting or ignoring the facts.

CNSNews has emerged as the conservative media’s lynchpin for original reporting, investigative reporting, and breaking news. We are part of the only organization purely dedicated to this critical mission and we need your help to fuel this fight.

Donate today to help CNSNews continue to report on topics that the liberal media refuse to touch. $25 a month goes a long way in the fight for a free and fair media.

And now, thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, you can make up to a $300 gift to the 501(c)(3) non-profit organization of your choice and use it as a tax deduction on your 2020 taxes, even if you take the standard deduction on your returns.

— The CNSNews Team

DONATE

Connect

Sign up for our CNSNews Daily Newsletter to receive the latest news.