Analysts See Higher Cost to Bush Tax Plan

Times Staff Writer

Congressional tax experts said Tuesday that President Bush's huge new tax cut package will cost $114 billion more between now and 2013 than the administration originally estimated.

Although the 7.8% increase is fairly modest, the higher price is sure to set off a new round of jitters among congressional leaders already fearful that weaker tax revenue and rising estimates for the cost of a war against Iraq could send the federal budget deficit out of control.

Leaders of the Republican-controlled Congress are anxiously awaiting a report Friday by the Congressional Budget Office that estimates the costs of both the tax and the spending elements of Bush's budget proposal for fiscal 2004. Staffers warned that if the report shows deficits climbing toward the $400-billion mark even before war costs, Bush will find it much harder to win congressional approval for his new tax cuts, some of which are already controversial on Capitol Hill and among the public.

"It's going to complicate things a good deal," said one Capitol Hill budget veteran.

The White House has already said that, even without a war, it expects deficits of $304 billion for fiscal 2003 and $307 billion for fiscal 2004. The 2003 fiscal year ends Sept. 30.

Administration and Capitol Hill sources have said that the cost of defeating Iraq, occupying the country for six months and aiding regional allies could run an additional $80 billion to $100 billion in 2003 alone.

One measure of how worried Congress is is the revival of talk about "dynamic scoring," a technique that conservatives claim shows the growth-spurring and revenue-enhancing effects of tax cuts but which many mainstream analysts call little more than wishful thinking.

House and Senate leaders have begun to suggest that dynamic scoring may be able to eliminate as much as 40% of the deficits expected under the president's plan -- a reduction that would make it much easier for lawmakers to settle on a budget, even if the estimates ultimately proved wrong.

Specialists with Congress' Joint Committee on Taxation concluded Tuesday that Bush's "jobs and growth package" -- including proposed tax cuts that the administration said would cost $670 billion in lost revenue between now and 2013 -- is likely to cost almost $726 billion.

Chief among the package's elements with a higher price than the administration estimated is the dividend tax cut, the signature item in Bush's request. The White House said the measure would cost $364 billion. The Treasury Department subsequently raised the figure to $388 billion. The joint committee said Tuesday that it would top $395 billion.

In addition, the committee specialists said a set of new retirement and lifetime savings tax breaks, which the administration said would cost essentially nothing in the first decade, would actually cost $11 billion in revenue. The administration appears to have backed off the proposals after they created a firestorm of controversy.

Overall, the congressional specialists said the president's tax cut package would cost about $10 billion a year more than the administration estimated this fiscal year and next and still more in later years.

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