Budget Extends Pro-Growth Tax Cuts, Expands HSAs, More Spending Restraint Needed


WASHINGTON – Today President Bush submitted his budget for the fiscal year 2007, which extends his very successful tax cuts into future years and expands Health Savings Accounts. Both of these provisions are top priorities for American taxpayers. The budget again sets forth non-discretionary spending to increase within inflation while seeking $65 billion of entitlement savings in Medicare. The budget also seeks to eliminate 141 government programs.

While these savings are applauded, total spending is set to increase $237 billion from $2.47 trillion to $2.71 trillion. This is a 9.6 percent increase in total spending, which is more than three times the rate of inflation and will expand the federal government as a percentage of national income for the sixth straight year.

“The U.S. economy is strong and the envy of the world because of the tax cuts enacted in 2003,” said Grover Norquist, President of Americans for Tax Reform. “By extending the tax cuts, this budget ensures strong continued economic growth will continue in the short term. However, without better spending restraint, the effect of the tax cuts will be diluted and the opponents of tax cuts will continue to call for tax increases. We urge Congress to reduce other parts of the budget so spending grows in line with the growth of working families incomes.”

Americans for Tax Reform is very encouraged by the President’s decision to create a new Dynamic Analysis Division within the Treasury Department’s Office of Tax Policy. This is a long overdue change since current methods of evaluating tax cuts do not consider economic growth effects and hence the tax revenue changes associated with cutting taxes. Just last week, data provided by the Congressional Budget Office (CBO) showed capital gains revenue increased $45 billion above projections despite the repeated warnings that the tax cuts would lose money. This is just the latest example of government estimators missing their forecast and making it more difficult for tax cuts to be implemented.

“Creating the Dynamic Analysis Division will finally provide us with accurate information on the effectiveness of tax cuts,” Norquist continued. “For too long, the CBO and JCT have totally missed the mark on predicting what effect tax cuts have on this economy. This office will finally give members of Congress and the Administration the correct information regarding the impact of tax cuts on savings and investment.”