Djou: Raising $3.8 Trillion In New Taxes a Bad Idea
As a guest on Fox Business News Monday evening, Hawaii's Republican 1st Congressional District representative told host Neil Cavuto that "raising $3.8 trillion in new taxes" from the expiration of Bush tax cuts is a bad idea. Is the number supportable?
As a guest on Fox Business News Monday evening, U.S. Rep. Charles Djou, a Republican, told host Neil Cavuto that “raising $3.8 trillion in new taxes” is a bad idea. Here’s the video, posted to YouTube by Djou’s team:
He was talking about the impact of allowing the so-called “Bush tax cuts” to expire at year’s end, a topic that has become hot in Washington in recent weeks. We asked Djou’s office where his numbers came from, and spokesman Daniel Son wrote back:
We are using $3.8 trillion, which covers 2010-20 and makes the following assumptions:
Provisions of EGTRRA and JGTRRA (except AMT patch) as they exist in 2010 are made permanent.
The 2009 AMT patch is permanently extended and indexed for inflation.
Son also included a list of the tax increases that could go into effect on Jan. 1, 2011. Here’s one example:
Indexing the Alternative Minimum Tax would cost another $558 billion. The debt service on those two provisions would tack on another $594 billion and $125 billion, respectively. Add up those four numbers and you’ve got $3.844 trillion, which Djou was generous enough to round down to $3.8 trillion.
So Congressman Djou’s math skills are up to snuff, but his use of the word “new” to describe the taxes is questionable. It shifts responsibility from those who implemented the cuts and included a sunset clause — President George W. Bush and the Republican-controlled Congress in 2001 and 2003 — to Democrats who now control both the executive and legislative branches and need to figure out how to handle the “ticking time bomb.”
More important, he’s making an assumption that Congress will do nothing between now and year’s end and that income tax rates will increase for nearly all Americans. That’s an extreme reading of Democrats’ stance on the tax cuts. He’s making it seem like an all or none proposition. It’s not. Democrats seem likely to extend at least some of the tax cuts.
During the campaign, then-Sen. Barack Obama said he’d allow the Bush tax cuts to expire for those in the highest tax brackets — remember Joe the Plumber? President Obama’s Fiscal Year 2011 budget, submitted earlier this year, included an end to tax cuts only for those families making more than $250,000 annually.
It appears that his plan hasn’t changed since the campaign trail or since the budget was submitted. This past weekend, Treasury Secretary Timothy Geithner said the Obama administration supports extending the cuts for those in the middle class who earn less than $250,000 a year.
Geithner said 2 or 3 percent of Americans make more than a quarter of a million dollars. And even if that small minority represents a healthy chunk of the nation’s wealth, any congressional action seems likely to preserve at least a portion of the Bush tax cuts. In fact, some Dems are even talking about extending the tax cuts for everyone, including the rich.
Barring an unforeseen change of heart on the part of the Obama administration and congressional Democrats, the increase in income taxes over the next decade will be far less than the $3.8 trillion Djou indicates.
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