Republicans Introduce Bill to Extend Tax Cuts

By Nathan Burchfiel | July 7, 2008 | 8:32pm EDT

( - House Republicans introduced legislation Thursday that would make tax cuts first implemented in 2001 and 2003 permanent, citing economic growth as evidence that they work.

"The idea of tax cuts influencing the economy, producing revenue that not only comes in for government but comes in for taxpayers ... works and it produced good things," Rep. Tim Walberg (R-Mich.) said in a news conference introducing the legislation.

The bill would eliminate the "sunset" provisions of the 2001 and 2003 tax cuts, which are set to expire in 2010 unless Congress acts to renew them.

Walberg cited a recent report showing increased revenues in more than 40 states as evidence that the tax cuts have stimulated economic growth resulting in Americans having more money to spend.

He was referring to a June 11 New York Times article that attributed state budget surpluses to "higher than expected tax collections ... and booming local economies" but did not attribute this to the federal tax cuts. Walberg said the root cause of those booming local economies has been the federal tax cuts.

Former Republican House Majority Leader Dick Armey, now chairman of the conservative activist group Freedom Works, said it was "obvious that we should make the current tax cuts into permanent law."

The legislation has 80 House co-sponsors, but supporters acknowledged that getting it passed in a Democrat-controlled Congress will be an uphill battle. Rep. Jim Jordan (R-Ohio.) compared the coming fight to the biblical story of David and Goliath, in which the outsized and under equipped shepherd was able to defeat the intimidating giant.

Jim Horney, director of federal fiscal policy at the Center on Budget and Policy Priorities, said making the tax cuts permanent would make deficit problems worse in the long wrong. He called Walberg's defense of the tax cuts "nonsense."

"The key issue is that even if we do not make those tax cuts permanent, we're looking at a long-term budget problem that's very large," Horney told Cybercast News Service. "Extending the tax cuts more than doubles the size of the long-term problem that we're facing."

The CBPP on its website estimates that extending the cuts "would cost about $3.5 trillion over the next decade."

"Anybody who has looked at it carefully comes to the conclusions that cutting taxes does not increase revenues," Horney said.

He also criticized Walberg's argument that spending habits, not revenue policies, are to blame for deficits and debt. "Right now when you look at spending relative to the size of the economy - total spending - it is not out of line with historical numbers, and revenues are not high by historical standards," Horney said.

"To deal with the long-term problem that we have, we need to look at ways to control spending," he said, "but we also need to look at ways to raise revenues, and blithely extending the 2001 and 2003 tax cuts, which ... more than doubles the long-term problem, just doesn't make any sense."

Horney conceded that at least some of the cuts, especially those that help the middle class more than the wealthiest Americans, will probably be extended.

"Given the widespread support for [extending middle class tax cuts], my assumption is that when there's finally an agreement on what we should do about revenue that at least some of those things are likely to get extended," he added.

But Walberg said his coalition was not interested in compromise, because American taxpayers are "not speaking with compromise."

"They've benefited from these tax cuts," Walberg said. "That says what we ought to be doing - not worrying about compromising and what we'll leave as tax cuts and what we'll increase."

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