The Long-Run 'Cost' of Tax Cuts

Abstract

Some recent analyses have claimed that the 75-year cost of extending the 2001 and 2003 tax cuts is as large as the funding imbalances in Social Security and Medicare. This article takes a critical look at these analyses and finds them flawed and misleading. Previous analyses have relied on extreme assumptions about the acceptable level of future taxes and, as a result, have overstated the long-run revenue costs of extending the tax cuts, likely by a factor of 10 or more. The long-run cost of extending the tax cuts is not remotely comparable to the long-run imbalances in the leading entitlement programs.