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Estimate of Budget Surplus Doubles The Congressional Budget Office (CBO) has raised its projection of the cumulative federal budget surplus to nearly $2.2 trillion by 2010. The projection, which many analysts believe is overly optimistic, assumes that the economy remains strong and government spending remains within existing budgetary caps. The huge increase in projected surpluses reflects record increases in tax revenues as a result of the booming economy. For the year ending September 30, 2000, the CBO projects a surplus of $232 billion. For fiscal 2001, it forecasts a surplus of $102 billion. Presidential Candidates Differ on How to Spend Surplus George W. Bush, the Republican presidential candidate, has proposed cutting taxes by more than $1.3 trillion over the next 10 years. He favors the elimination of both the estate tax and the marriage penalty. Vice President Al Gore, the Democratic candidate, has proposed a more modest tax cut of $250-$300 billion. His plan would spend most of the surplus on reducing the nation's huge debt and shoring up Social Security and Medicare. Republican Congress Proposes Elimination of Marriage Penalty and All Estate Taxes Republican lawmakers supported two important changes in the tax code in 2000: elimination of the marriage penalty and an end to the federal estate tax. The so-called "marriage penalty" refers to the fact that some married couples pay more in taxes than each spouse would pay by filing separately. According to the Congressional Budget Office, more than 20 million married couples pay this penalty. Another 25 million couples receive a marriage bonus, however, paying less in taxes than they would if they filed singly. Implementing the Republican proposal would cost the government $292 billion over 10 years. Under current tax law, no taxes are levied on the estates of the 98 percent of Americans who do not leave very large estates when they die. For people who do leave very large estates, heavy federal taxes are levied, with the top rate reaching 55 percent. Republicans argue that it is unfair to tax people after they are dead. They have also expressed concern that some wealthy farmers and business owners have been forced to sell off their assets to pay their estate taxes. Their plan would phase out the federal estate tax over the next 10 years. Implementing the plan would cost the government $100 billion during the first 10 years and $750 billion between 2010 and 2020. Democrats argue that all of the lost tax revenues would go to very wealthy Americans. They note that about 5,000 very wealthy families would enjoy tax cuts of about $2 million each under the plan. Think About It
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