February 9, 2001 | WebMemo on Taxes
President Bush delivered his $1.6 trillion tax-cut package to Congress Thursday. The good news for taxpayers is that the momentum is building to increase the amount. Numbers that were scoffed at during the presidential campaign are receiving much better reception after prevalent signs of a weakening economy, and the backing of Fed Chairman Alan Greenspan.
Rep. Pat Toomey, R-Penn., is leading an effort in the House to create an even larger tax-cut package, returning more than $2 trillion to hard-working Americans. Lawmakers are now willing to support greater tax relief because they understand lowering tax rates encourages work, savings and investment - leading to a stronger economy.
The Congressional Budget Office reported last week that the federal budget surplus could reach $5.6 trillion over the next decade. Many of the components in the president's proposal would also be phased in during that same 10-year period. A pace that many economists and lawmakers now believe will do little to promote growth - as was evident when former President Ronald Reagan took three years to phase in his tax-cut program - and not provide a significant tonic when needed most.
"In the longer run, a tax cut that isn't fully phased in by 2004 could also be reversed by the next president," the Wall Street Journal recently editorialized. "It's easier to stop a tax cut that hasn't happened yet than it is to repeal it."
So those major components of Bush's plan - reducing income-tax rates, easing the marriage penalty, phasing out the estate tax and boosting tax breaks for charitable contributions - are aimed in the right direction but may not do enough, quickly enough.
"Eliminating the marriage penalty, the death tax, and implementing rate reductions are steps that can be taken immediately," said Heritage's Dan Mitchell. "That would provide real relief and real momentum."
Which can benefit everyone. Even the New Republic's Andrew Sullivan has defended Bush's tax cuts because of the very benefits they give to the lower- and middle- class workers. "Look at the percentage cuts in Bush's plan," he writes. "The poorest earners get a 33 percent cut in their income taxes; the lower middle class gets a 46 percent cut; the upper middle class gets a 30 percent cut; the most successful get a 17 percent cut."
This debate arrives the same week America celebrates former President Reagan's 90th birthday. Coincidentally, Reagan faced similar opposition for his proposal to slash tax rates. He won that fight, and despite recent sluggishness America is still enjoying the resulting economic boom.
Former Republican Vice Presidential candidate Jack Kemp, in a recent homage to Reagan, cited this quote from the Gipper, "I have always believed that govt. has no right to a surplus; that it should take from the people only the amount necessary to fund govt's. legitimate functions. If it takes more than enough it should return the surplus to the people."