The Bush Tax Cut February 28, 2001February 17, 2017 Yesterday’s column didn’t get posted till noon because, as mentioned Friday, there just aren’t enough hours in the day. If the Sumerians had had more fingers, there might be. Tomorrow’s column will pick up that theme. But here’s the deal on the President’s tax cut: It’s irresponsible (because it’s too big) and unfair (because 43% of it goes to the wealthiest 1%). IRRESPONSIBLE What if the huge surpluses – unforeseen even a couple of years ago – fail to materialize? This is already what’s happened in the State of Texas, where a projected $1.8 billion surplus turned into a shortfall. What has happened in the last several months that make us now pretty certain that the surpluses will be huge? (You will recall that the projected surplus just kept jumping a trillion here and a trillion there.) Is it the collapse of the dot-coms that have given us this assurance? Is it the breakdown of the Middle East peace talks or the bombing of Iraq? The power shortage in California? What new thing happened to so assure us of a gigantic 10-year surplus as to justify our prudently ‘spending’ much of it in advance? Nothing. Don’t get me wrong. The numbers could be right, and I hope they are. But where would be the harm in a smaller tax cut – perhaps one that gave 98% of Americans exactly what President Bush proposes, but leaves the top 2% suffering much as we do today? (I’ll get to our suffering and the fairness issue in a minute.) Right there, you’ve about halved the proposed tax cut, making it still large, still a great boost to the flagging economy, but not so large as necessarily to seem reckless. A smaller tax cut would likely mean lower interest rates, because big tax cuts a happy bond market do not make. And that would mean lower monthly mortgage payments and lower car loan payments. What’s wrong with that? What’s wrong, when you’re $5 trillion in debt and you’re running a surplus, with paying down that debt? The Republicans say no: if we don’t cut taxes, Congress will just recklessly spend the surplus. But last I checked, Republicans controlled both houses of Congress and had veto power in the White House. Are they branding themselves reckless spenders? UNFAIR I love rich people. By many measures, I am one. The last thing I want to see or promote is class warfare. I feel certain that Warren Buffett, George Soros and Bill Gates, Sr. feel much the same way. But under Clinton/Gore, we found a balance that works pretty well. Yes, taxes were raised for those at the top (but only for those at the top) . . . but look what that added revenue brought us: surpluses instead of deficits, low interest rates, 22 million new jobs – it proved to be a spectacular formula for economic success. We found a good balance. And even though the tax rates for those at the top jumped from 31% to 39.6%, this is modest when compared with the 90% top rate under Eisenhower. Or the 70% rate under Kennedy, Johnson, Nixon, Ford and Carter. Or the 50% during the first part of the Reagan era. Nor does it adequately acknowledge the proportion of rich folks’ income that is taxed at the favorable 20% long-term capital gains rate, or at the 0% tax-free bond rate. President Bush understands the plight of the rich better than almost anyone. He feels their tax burden, and that’s commendable. But when you make a list of the world’s problems – 43 million Americans without health insurance, millions of kids in overcrowded, dilapidated classrooms, a plague destroying Africa, the devastation of the rain forest – how high can the plight of the rich rank? By most measures, their income has shot up faster than average even after allowing for the taxes they pay. The wealth gap between the top 1% and everyone else, despite these tax brackets, continues to widen. Why accentuate the trend? Is it fair that the top 1% live so much cushier lives than everyone else? Sure it is! But does it make sense to cut their taxes by tens, and in some cases hundreds, of thousands of dollars a year? Not to me. You probably saw Tom Daschle showing how the top 1% would get a brand new Lexus every year from the President’s tax cut, while the average family got the equivalent of a muffler. It’s one thing for us to honor our top 1% and wish them well – as we should. It’s another to tip the balance significantly further in their favor.