taxes, custom duties and miscellaneous receipts (which include deposits of earnings by the Federal Reserve System, fines, penalties, fees for regulatory services, and others).

Under current law, federal tax collections are projected to total $27.9 trillion over the next ten years. This year, total revenues are projected to be 17.6 percent of GDP, just slightly below the post World War II average level of 17.9 percent. Over the projection period 2004-2013, under current law, total revenues are projected to average 19.2 percent of GDP, far above historical averages for any time period, including times of war.

Revenues
On-budget
Off-budget

COMMITTEE-REPORTED RESOLUTION

[In billions of dollars]

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1854.9 1908.6 2106.9 2282.2 2445.2 2590.8 2741.9 2892.8 3034.5 3200.8 3379.3 1323.3 1350.7 1519.2 1663.1 1794.1 1906.4 2022.8 2137.1 2242.3 2371.3 2509.7 531.6 557.8 587.8 619.1 651.1 684.4 719.1 755.7 792.1 829.5 869.7

The Committee-reported resolution assumes revenue reductions sufficient to accommodate President Bush's jobs and growth tax relief plan. This pro-growth, pro-family and pro-jobs plan provides tax relief of $423 billion over the next six years and $698 billion over the next eleven years. The President's plan includes three main components: tax relief for working families (by speeding up individual income tax marginal rate reductions already in law, accelerating marriage penalty relief already in law, increasing the child credit immediately to $1,000, and increasing the AMT exemption amount), elimination of the double taxation of dividends, and a permanent increase in small business expensing. Since the child credit is partially refundable, the Committee-reported_resolution assumes outlay increases sufficient to accommodate the President's growth plan-$21.8 billion in new spending over the next six years and $27.5 billion in new spending over the next eleven years (reflected in function 600).

The revenue foregone by enacting the President's jobs and growth plan should be considered a cost-effective investment for both short-term stimulus and the long-term health of our economy. The revenue loss from the plan assumed in the Committee-reported resolution does not take into account the favorable effects of the proposed tax relief on GDP and taxable income; these favorable effects will result in more economic growth and more taxable income than is projected under the baseline.

The Committee-reported resolution reconciles the Finance Committee for a reduction in revenues and an increase in outlays consistent with the President's jobs and growth plan. The Finance Committee is instructed to report legislation by April 8, 2003 to reduce revenues by $698.294 billion over 2003-2013 and to increase direct spending by $27.476 billion over 2003-2013.

The Committee-reported resolution assumes, but does not reconcile, the permanent extension of the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) which are currently scheduled to expire after 2010. The eleven year tax relief assumption for the EGTRRA extensions is $601.9 billion, with $592.6 billion of the revenue loss (98 percent) occurring in

years 2011-2013. The permanent extension of the EGTRRA provisions also results in an increase in direct spending of $22.3 billion over eleven years. This amount is reflected in the function 600 assumptions.

The Committee-reported resolution also assumes about $16 billion in tax relief over eleven years from provisions that are expected to be reported by the Finance Committee as part of energy policy legislation, and which may include proposals to modify the tax credit for small ethanol producers and provide tax incentives for the production of biodiesel. The Committee-reported resolution assumes the revenue impact of S. 476, the Care Act of 2003, and S. 351, the Armed Forces Tax Fairness Act of 2003, which have been reported by the Finance Committee, as well as medical malpractice reform (as in H.R. 4600 from the 107th Congress) and mental health parity (as in S. 543 from the 107th Congress). Finally, the Committee-reported resolution assumes $3.3 billion over eleven years from revenue offsets (for improving tax administration) recommended by the President.

There are a host of other tax relief provisions that have been recommended by the President, as well as many proposals that have been discussed in Congress. The Committee-reported resolution does not preclude action on any of these proposals. The tax-writing committees may choose to work any number of proposals into the tax relief assumptions contained in the Committee-reported resolution, either by following different policies than assumed in the Committee-reported resolution or by proposing additional offsets to tax relief measures.

C. DEBT LEVELS

Gross federal debt (and the associated debt subject to limit) is comprised of debt issued to government accounts as well as debt held by the public. Debt held by the public is issued by the government to raise cash, and is the most meaningful measure of debt in terms of its relationship to the economy. Debt held by government accounts reflects one part of the government borrowing from another part, and involves no cash transactions with the public. It is used to track money flows relating to specific trust fund programs, for example, Social Security.

Debt held by the public reached 109 percent of GDP during the heavy borrowing time of World War II, and it took nearly another two decades before debt held by the public fell to its post-war average of 41.5 percent of GDP. The CBO baseline projects debt held by the public to be $3.816 trillion in 2003, or about 35.5 percent of GDP. Under the Committee-reported resolution, debt held by the public rises to $5.273 trillion in 2013, or 29.5 percent of GDP, far below the post-war average level and to a very manageable level.

COMMITTEE-REPORTED RESOLUTION

[Dollars in billions]

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3858.4 4184.7 4446.7 4661.2 4828.6 4980.0 5101.9 5190.5 5274.7 5286.6 5273.3 35.9 37.0 37.3 37.0 36.4 35.6 34.7 33.5 32.5 31.1 29.5

2003

Debt Held by the Public
Percent of GDP

Under the Committee-reported resolution, debt held by the public is higher than in the CBO baseline due to the policies assumed in the resolution. This short-term increase in debt should be considered an investment in the long-term growth and health of our economy. Under the Committee-reported resolution, debt held by the public declines as a percentage of GDP, from 37 percent in 2004 to 29.5 percent in 2013.

The acting Secretary of Treasury wrote to Congress last December and again in February asking for an increase in the statutory debt limit. Treasury has already reached the limit and has begun suspending investments in the G-Fund of the Federal Employees Retirement System. Congress has not yet acted to increase the limit.

D. TAX EXPENDITURES

The Congressional Budget Act of 1974 requires a listing of tax expenditures in the President's budget submission and in reports accompanying congressional budget resolutions. Tax expenditures are defined by the Act as "revenue losses attributable to provisions of the Federal tax law which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability." Under this definition, the concept of tax expenditures refers to revenue losses attributable exclusively to corporate and individual income taxes. The estimates presented here are those of the Joint Committee on Taxation and are based on the committee's most recent report of December 19, 2002 (Estimates of Federal Tax Expenditures for Fiscal Years 2003-2007) (JCS-5-02). Because of the interaction among provisions, the Joint Committee on Taxation warns that it is incorrect to assume that estimates of separate tax expenditures can be summed to calculate a total revenue effect of a repeal of a group of tax expenditures. The tax expenditures in the following list are listed separately, under the assumption that all other tax expenditures remain in the code. If two or more tax expenditures were estimated simultaneously, the total change in tax liability could be smaller or larger than the sum of the amounts shown for each item separately.