President Bush may not realize it, but moderate and liberal members of Congress could save him a lot of grief if they voted down or sharply modified the Administration’s proposal for a massive tax cut.
Fueled by the excess of campaign promises, the President’s $1.6 trillion tax cut threatens to return the nation to the dark days of growing deficits, higher interest rates and tight-fisted public investment policies which leave no room for dealing with the nation’s most pressing social and economic problems.
Sadly, the President has put the plan forward with flimsy supporting data and with long-range highly optimistic projections of budget surpluses that, if history is any guide, will fade under economic and political realities. The Congressional Budget Office (CBO), on whose projections the President hangs his tax cut hat, concedes that its projections are subject to wide ranging variables that may or not survive rising costs and unforeseen economic problems?for example, rising costs for health care or slower than anticipated economic growth.
CBO says that their projections could be off either up or down by as much as $52 billion this year, $120 billion in 2002 and $412 billion by 2006. Yet the Administration and the tax cut proponents in Congress ignore the CBO’s caveats, and sell the plan to the American public as if it were based on hard facts. In reality, the chance of coming up with accurate projections of budget surpluses over a 10 year period is more akin to hitting the numbers in a lottery game than it is to a mathematical science. It is the height of fiscal irresponsibility to cut taxes by $1.6 trillion on the basis of uncertain projections of surpluses that may never be achieved.
Fiscal irresponsibility may be an incurable Washington disease, but lurking under the cover of the tax cut is an attack on social and economic programs vital to the future of the nation. If budget surpluses are to be given away, the chances of dealing with long-neglected core needs will be lost.
The proponents of the $1.6 trillion tax cut are essentially saying that they see no significant unmet needs in the nation now or over the next decade. It is a clear signal from the White House that the new Administration has no plans to deal with serious problems of child poverty, health care, lack of affordable housing, the revival of our inner cities and depressed rural areas, public transit and the decaying public works structure throughout the nation or other long-standing needs.
Members of Congress should wake up to the fact that the tax cut is locking the door on America’s future. This lack of vision (or lack of caring) on the part of the Administration will ultimately cost the nation many times the price of a $1.6 trillion tax cut.
Even if the proposal did not endanger social and economic programs, the tax cut should be rejected on the grounds that it is unfairly loaded in favor of wealthy citizens and provides no real relief for lower income families.
More than 40 percent of the tax cut will go to the wealthiest one percent of the population which is about double the share of federal taxes these citizens pay. The share of the tax cut for the top one percent of the income brackets will exceed the share of the tax cut received by the bottom 80 percent of the people combined.
Probably the biggest tilt in favor of the wealthy is the President’s insistence that the inheritance or estate tax-levied only on the richest two percent of the population–be eliminated. Already, $650,000 of an estate is exempt from tax-$1.3 million for a husband and wife. Under existing law, the exemption will be raised to one million dollars in 2006 or two million for a couple.
Before falling for the propaganda about a “death tax,” Congress should take a close look at the numbers. In 1998, 2.3 million persons died, but only 47,482 left estates subject to any federal estate tax. Only 1,418 of the estates that were taxable represented estates where the majority of the assets were family owned businesses or farms. These estates paid less than one percent of all estate taxes.
Lobbyists for wealthy clients, nevertheless, are using the family farm and small business issue as a smokescreen to promote the wipe out of the inheritance tax across the board at a cost of $27 billion annually to the Treasury. Obviously, the family owned farms and businesses could be exempted from the tax without seriously reducing Treasury receipts and without giving the wealthy another loophole through which to avoid taxes.
The President has picked the wrong priority for his first real battle with the Congress. The immediate needs of the nation are not a massive tax cut which goes largely to the wealthiest citizens. The President, unfortunately, has introduced an unhealthy note of fiscal irresponsibility by proposing the giveaway of a “surplus” which is yet-to-be-achieved and which may never be achieved. Where is the old Republican tradition of fiscal responsibility? Has it been overtaken by the need to reward the corporate interests and the wealthy who finance political campaigns? And as an article in the February 7 editions of the Wall Street Journal points out, Mr. Bush would be rewarding himself, VicePresident Dick Cheney and other wealthy appointees in his Administration.