Tags: Lawmakers | Face | Tax | Deadline | Their | Own

Lawmakers Face Tax Deadline of Their Own

Monday, 03 April 2006 12:00 AM

As procrastinating taxpayers have just less than two weeks left to file their taxes with the federal government, tax-makers in Washington, D.C. are dealing with a deadline of their own.

Lawmakers also have until mid-April to extend the current 15 percent rate on capital gains and dividends taxes beyond 2008. The lowered rate was a key provision of the 2003 Bush tax cuts, and conservatives credit it with reviving the economy and increasing federal tax receipts.

Accordingly, House and Senate Republicans would like to extend the rates this year. But their vehicle for doing so, the 2005 tax reconciliation bill, is stalled in a conference committee.

The House version of the tax reconciliation bill included a provision to extend the lowered rates, but the Senate bill did not. Undeterred, Senate Republicans have insisted that the capital gains and dividends tax extension be included in the final bill. Unfortunately, Senate Democrats - lead by Sen. Max Baucus, D-Mont. - stand in the way.

In early February, Baucus invoked an obscure budget rule that requires a 60-vote majority for the Senate to pass legislation negatively affecting government revenue during the second five years of the 10-year period that it uses for budget estimation purposes.

Baucus' objection was based on calculations by the Joint Committee on Taxation (JCT) that an extension would reduce federal tax receipts by $30 million after 2009. But conservatives point out that the JTC does not have a stellar record in predicting tax revenues, particularly those related to lower capital gains and dividends taxes.

Prior to the current rate reductions, the JCT estimated there would be $44 billion and $49 billion in federal receipts from the capital gains tax in 2004 and 2005. Instead, the government collected $60 billion in 2004 and another $75 billion in 2005.

The miscalculation did not surprise conservatives. They say the JCT numbers are off because they are based on static rather than dynamic scoring.

Dan Clifton of the American Shareholders Association explained the concept to NewsMax. "The predictions in 2003 were wrong," he said, "because the JCT calculates its predictions without taking growth spurred by lower tax rates into account. Their method is what's called static scoring."

Contrary to what the JCT predicted, Clifton pointed out, the tax cuts actually increased federal revenues as a result of the highest growth rate for gross domestic product in 20 years.

Dynamic scoring, by contrast, includes estimates of the impact tax rates have on investment and economic growth. Senator Judd Gregg outlined the concept on the Senate floor. "It is called human nature," he said, "and human nature drives what revenues are here at the federal government."

"Reducing those rates creates more economic incentive for people to be productive, and it actually generates more economic activity which is taxable and therefore generates more income to the Federal treasury."

But the inaccuracy of static scoring does not matter in this context. The JCT is the official scorekeeper in Congress, and as such, supporters of extensions need 60 votes to pass the bill they want.

Lacking those 60 votes, Republicans are considering alternative strategies. They will have to make a decision soon though, as April 15 looms large on the horizon.

103-103

© 2019 Newsmax. All rights reserved.

   
1Like our page
2Share
Pre-2008
As procrastinating taxpayers have just less than two weeks left to file their taxes with the federal government, tax-makers in Washington, D.C. are dealing with a deadline of their own. Lawmakers also have until mid-April to extend the current 15 percent rate on capital...
Lawmakers,Face,Tax,Deadline,Their,Own
534
2006-00-03
Monday, 03 April 2006 12:00 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
America's News Page
© Newsmax Media, Inc.
All Rights Reserved