- Crucially, and misleadingly in the view of many people, the figures also assume that the tax cuts passed last year will be reversed at the end of 2010.
The Economist doesn't mention the reason for this strange assumption, which is that the tax code is actually written that way --- in 2010, tax rates are actually scheduled to revert to pre-cut levels. Without that provision, even the Republicans' own budget projections didn't work out.
But that leaves the tax code with some very strange features, as Paul Krugman, the Blogavarians' least favorite economist, explains:
- So in the law as now written, heirs to great wealth face the following situation: If your ailing mother passes away on Dec. 30, 2010, you inherit her estate tax-free. But if she makes it to Jan. 1, 2011, half the estate will be taxed away. That creates some interesting incentives. Maybe they should have called it the Throw Momma From the Train Act of 2001.
Tom Daschle has been dropping hints for a while now that it would be best for the government's fiscal health to keep tax rates at current levels. Republicans and Blogavarians both have been describing that as a tax increase because it would require repealing the scheduled decrements to the tax rates in the Bush tax bill.
By that Humpty Dumpty logic, of course, the increments to tax rates currently scheduled for 2010 (including the reinstatement of the estate tax), and for that matter, the expiration of Alternative Minimum Tax cuts in 2004, are not a tax increase, since they take effect without any change to current law.
I trust they'll remember that when the time comes.