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U.S. Rep. Charles Bass sees a perfect financial storm looming. Meeting last month with The Telegraph editorial board, Bass, a New Hampshire Republican, ran through the list of upcoming votes that could divide Congress and American taxpayers over the coming months. We now have a sequester of about $1 trillion hanging over our heads at the end of the year, Bass said in the April 3 meeting, referring to mandatory cuts that will take effect if Congress doesn't act. He added, We have the payroll tax issue to address. We have the expiration of the Bush-era tax cuts, all of them, which, if un-extended, would be the biggest tax increase in the history of the country, about $4.6 trillion over 10 years. There is certainly no shortage of major votes facing Congress as the fall election approaches. But, are Americans really facing the biggest tax hike in history? We decided to crunch the numbers. Bass is hardly the first politician to make the claim. When the Bush tax cuts were last up for renewal in 2010, it became a rallying cry of sorts for Congressional Republicans and news entities alike. Former Vice Presidential candidate Sarah Palin made a similar claim that year when she appeared on Fox News Sunday. PolitiFact ruled the claim Pants On Fire at the time because she was wrong about the ranking and also incorrectly described the Democrats' plans. And the numbers haven’t changed much since. Estimates vary as to how much taxes would rise if the Bush-era tax cuts were allowed to expire fully. Congress approved the tax breaks in 2001 through the Economic Growth and Tax Relief Reconciliation Act , and adjusted them in 2003 through the Jobs and Growth Tax Relief Reconciliation Act . The tax cuts were set to expire in 2010, because they passed Congress through a procedure known as reconciliation, which only requires 50 votes in the Senate. But, after a heated debate, lawmakers voted in 2010 to extend them for two more years. Some tax analysts have argued that, because the tax cuts were intended to be temporary, their expiration does not count as a tax increase. But, we’ll leave that argument for another day. Most estimates for the increase caused by repealing the tax cuts hover around $3.7 trillion over 10 years, the number represented in the Congressional Budget Office’s Budget and Economic outlook from January. (The number is listed under the category of extend certain income tax and estate and gift tax, though analysts assure us that it refers to the Bush tax cuts). In his statement, however, Bass included not just the $3.7 trillion estimate, but an additional $900 billion from the Alternative Minimum Tax, another level of income tax set to expire at the end of this year. The expiration of just those two measures results in income tax brackets rising at all levels, Bass spokesman Stephanie DuBois wrote in an e-mail to The Telegraph. In hard dollars, the total $4.6 trillion figure would rank among the highest tax increase in history, analysts say. But, through the lens of the Gross Domestic Product -- the only true way to assess tax increases in an apples to apples way, according to analysts -- the Bush tax cuts don’t measure up. Spread out over the next 10 years, the $4.6 trillion tax increase would amount to about 2.25 percent of the total GDP. We calculated that figure, with help from several tax analysts, by adding together the Budget Office’s projected GDP figures over the next 10 years, 2013-2022, and dividing it by the $4.6 trillion figure. The result is higher than most tax increases in recent history, according to a U.S. treasury department report , released in 2006, which analyzes all tax provisions since 1940. According to the report, the Bush tax cuts have held a higher percentage of the GDP than many of the biggest tax laws in recent history. It beats out the the Tax Equity and Fiscal Responsibility Act of 1982 , which measured in at 1.23 percent of GDP by the time all its provisions went into effect in 1986. It also measures larger than the Revenue Act of 1941, which at $3.6 billion, amounted to 2.2 percent of GDP. Yet, according to the treasury department analysis, the Bush tax cuts fall well below the Revenue Act of 1942, which is estimated at 5.04 percent of GDP. This would make the Bush tax cuts, should they expire, the second largest tax increase in history, as a percentage of GDP. There is no doubt, if all the (Bush) tax cuts were allowed to expire, this would have a very big impact, said Howard Gleckman, an analyst at the Tax Policy Center , an independent tax analysis group, and author of the blog TaxVox.org .. But, if you’re asking the question, would it be the largest tax increase ever?, the answer is no, Gleckman said. World War II required this massive tax increases, and nothing we’ve done since have come close. Further, as Gleckman notes, few in Washington, D.C. expect the Bush tax cuts to expire in full. Rather, the debate centers largely on whether to extend the tax breaks for the nation’s highest earners, those taking in $200,000 or more a year. If those cuts were allowed to expire, it would mean a tax increase of about 0.4 percent of GDP, far less than Bass’ claim. Our ruling: The trillions of dollars at stake this year with the expiration of the Bush-era tax cuts place them among the nation’s most costly. But, a historical review of other tax legislation show the cuts, if allowed to expire, would still amount to less than half the percentage of the Gross Domestic Product that World War II spending bills took on. We rate this claim Mostly False.
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