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Some Brief Thoughts on Tax Cutting Plans
by Brian S. Wise
10 January 2003 

Income taxes will always be too high; the question is, If you're going to make cuts, how?

There can be philosophical problems with any tax cutting plan, chief among them the fact that taxes are high enough to absorb cuts to begin with. That being the case, and with there existing a certain mindset suggesting any income tax is too much income tax, debate shifts to matters more practical: Who should get tax cuts and why? What are the political implications of any tax cuts? How will the federal government ever pay for those tax cuts? Should taxes be cut outright, gradually, or should one-time rebate checks be issued? So on and so forth. Worse yet, there exist souls so poor they are opinion columnists, and they are commanded by ideological forces beyond normal understanding to explain why their party’s plan is better than the other party’s plan, even if it’s not any better.

It just so happens President Bush’s tax cutting plan is better than the alternative offered by Democrats, if for no other reason because it temporarily takes more money out of the federal government’s hands (whatever growth is spurred by the plan should more than replace it). To get deeply into the particulars of the president’s plan would require more space than is commonly allowed this column, so the temptation to carry on enthusiastically about taxation’s lacking moral value isn’t an option. Instead, the original questions will be answered, so at least a certain ideological groundwork can be laid.

One: Who should get tax cuts and why? There is no greater irony in modern American politics than a dais full of millionaire liberal Democrats speaking at length about the inequities between the rich and the poor. At least Republicans (those of clear conscience, anyway) will tell you the truth: Of course this plan benefits the rich more than it benefits the poor, because the rich pay much more into the system than the poor, and therefore stand to gain more from even a one percentage point cut than the poor who, as the lowest 1/3 of all income earners in America, end up not paying any taxes at all.

President Bush’s mistake in this plan was in not coming out and asking for a (let’s use an arbitrary number) three percent rate cut in every income tax bracket, spread out over the next three years. But it’s not so grand a mistake that it cannot be overcome with what he prescribed for lower income people and working families, in the form of larger child credits, to make all sides content with their own priorities. (The great disaster of the plan was the $3,000 the president would like to give unemployed people to help them … do whatever, but that’s a column for another time.)

Two: What are the political implications of any tax cuts? If the plan as a whole in implemented, and things are going well in the fall of 2004, there are no political implications, other than those Democrats who went along with the winning idea can campaign on the success (as they should). If things don’t go well – an absurdity, given that the economy is expected to expand at three percent this year, and will go along naturally at a fine clip from there – the president will get a few knocks, but unless Jack Kennedy shows up tanned and well rested, or unless Iraq and / or North Korea goes very badly, Bush will win.

Three: How will the federal government ever pay for those tax cuts? It doesn’t. Governments don’t pay for tax cuts. They either absorb the temporary shortfalls, knowing that any ensuing stimulus will turn those deficits into surpluses, or they cut spending. “Paying for tax cuts” is a fancy way for politicians to say, “This thing about lowering people’s income tax is nice and all, but it takes money away from the federal government, giving it less to spend on pivotal programs.”

Exactly. Except that the money, by and large, won’t be spent on anything that matters, instead it will go into any one of the (numerically impossible to calculate) ridiculous studies, hog waste disposal farms, or whatever the hell else it gets spent on. And if you think the federal government isn’t still paying $500 for a plunger, you’re mistaken. A government with less money is inclined, one hopes against hope, to do less damage; the less money available to the feds the better. For that reason only, it’s almost a shame there will be any resulting stimulus at all.

Four: Should taxes be cut outright, gradually, or should one-time rebate checks be issued? One-time rebate checks are pleasant things to think about, but they fool way too many people into thinking they’re getting enough of their own money back, and that deception is the point behind any and all tax rebate checks. What’s more, the checks aren’t enough of a rebate, and they’re too short term. Rates of taxation should always be cut dramatically. Absent that, gradual cuts are fine, so long as they’re spread out over a few years and not a decade or more.

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