Tax cutters go wild
REMEMBER when Ronald Reagan told Jimmy Carter, ''There you go again"? The same jibe should be directed at the Republicans in Congress. Battered by war, corruption, and energy price increases, they offer the same answer to these problems as Reagan did: tax cuts for the rich. Like a tune from 1980, when Reagan made his crack, it's long out of date.
This time the Republicans have wrapped their aid to the wealthy around a benefit to the middle class: one more year of relief from the alternative minimum tax, and they've included a gimmick to make it seem less costly. To make sure that no one in the Senate questions the plan too closely, they made it part of a budget reconciliation resolution, impervious to filibuster.
But it is still a dumb idea, worse than the silly $100 fuel rebate proposal that Republicans advanced briefly. The new tax bill would extend the dividend and capital gains tax cuts for another two years, to the end of 2010, costing the Treasury perhaps $51 billion. The total cost of the bill would have been higher, but the Republicans included a provision that would allow wealthy people to convert their regular Individual Retirement Accounts into Roth IRAs. People who do that would pay taxes on the original IRA, and those payments would partially offset the tax cuts. But once in a Roth, that money would grow tax-free. Many affluent taxpayers would be willing to pay up now in the expectation of avoiding taxes later when rates will probably be higher to cope with the deficits and the baby boomers' retirement.
Apologists for the tax cuts contend that they are necessary to increase investment and are partly responsible for recent increases in federal tax receipts. That's not true. Receipts were bound to go up given the moderate growth in the economy. And revenues went up much faster during the boom years of the Clinton administration, when tax rates were higher. Whether under Presidents Clinton or Bush, tax rates were low enough to generate economic growth. The difference is that, during the Clinton years, the government raised enough money to put the budget in balance and keep interest rates down.
President Reagan, like Bush, was a great tax cutter, but he had a Democratic majority in the House of Representatives to remind him to provide additional revenue to keep the government functioning. Bush is surrounded by allies in Congress who will keep cutting taxes until the voters say: ''Enough is enough."
