A tilted tax cut
THE $145.9 billion tax bill about to clear Congress seems at first glance more friendly to the middle class than the three others approved during the Bush administration, but that's only because it represents unfinished business from the legislation oriented to wealthy taxpayers passed last year. Taken as a package, these four bills are a windfall for the wealthy and a threat to programs that have sustained middle-class and lower-income Americans for generations.
Most of the costs of the latest bill come from the extension of three provisions: the $1,000-a-child tax credit, relief from the so-called marriage penalty, and an expanded 10 percent bracket. Republican leaders of Congress, to reduce the cost of the $350 billion tax cut in 2003, mandated that these three popular items expire at the end of this year. They cleverly reserved any extensions for an election year vote, when few members of Congress would be brave enough to oppose them.
A bipartisan coalition in the Senate initially favored a more limited extension coupled with the closing of tax loopholes to offset the cost, but President Bush balked at this plan. With Election Day nearing, Democrats have abandoned the coalition plan, making passage of the deficit-balooning extentions -- roughly $145 billion over 10 years -- inevitable.
Since his inauguration, President Bush has pushed a tax cut bill through Congress every year. The huge federal deficits that have resulted in part from the cuts have made the United States more dependent on foreign capital to finance the debt and have made it less likely that the government will be able to strengthen the finances of the Social Security and Medicare programs in time for the retirement of the baby boomers. The tax cuts have also skewed the federal tax code in favor of the wealthy.
Even this latest bill, touted as a middle-class measure, is tilted toward the top 20 percent of income. According to the Urban Institute-Brookings Institution Tax Policy Center, households in the middle 20 percent would receive an average cut of $169 next year, while those in the top fifth would get $1,196 and those with incomes between $200,000 and $500,000 would receive an average of $2,172. As usual under the president's policies, those who are already well off receive the biggest benefit.
To restore fairness to the tax code, the least Congress could do is rescind tax cuts that favor the wealthy, as Senator John Kerry proposes. And voters of limited means -- including the middle class -- ought to remember that this latest tax cut, for all its seeming appeal, does little compared with the benefits available under Social Security and Medicare. Tax cuts are no substitute for solid, adequately financed social programs.
© Copyright 2004 Globe Newspaper Company.