A $70 billion exercise in fiscal cynicism is about to hit President Bush’s
desk that he will happily sign as one of the signal achievements of his
presidency. Whoever is in the White House and Congress in 2010 to pick up the
pieces and pay the bills may not think so.
This bill extends the president’s 2003 tax cuts – principally a 15 percent
maximum tax on capital gains and dividend income – and it passed along party
lines under rules that allowed it to clear Congress by a simple majority.
Another bill with up to $30 billion in tax cuts – for teachers and students
and for state and local sales taxes – is coming along next. And although it will
be considered under stiffer rules, this measure has Democratic support.
The Republican bill is very heavily weighted toward upper-income taxpayers.
The Tax Policy Center estimates that the average tax savings for someone earning
$50,000 to $75,000 at $112 and for a person earning over $1 million at $42,766.
The average tax cut is $453, hardly enough to result in the robust economic
growth that bill supporters predict.
The problem of seeming “fairness” in tax cuts is that the benefits of
necessity go to those who pay the most. But the biggest problem with tax cuts so
far is not their fairness but their affordability. Like previous tax-cuts
packages, this one is gimmicked up to seem like it will be a lot more affordable
than it is.
Most of the cuts are set to expire in kind of a big bang on New Year’s Eve
2010. And the economic assumption is that they will expire, making it appear
that revenues will shoot up sharply in 2011. It is hard to imagine a president
and Congress, facing mid-term elections, allowing that to happen even though we
will still be awash in red ink.
The exception is the egregious Alternative Minimum Tax, which, unless capped,
would each year sock an ever-increasing number of taxpayers with significantly
higher taxes. Any true tax-cut program would abolish the AMT, but Congress likes
to appear it is doing the taxpayers a favor each year and, indeed, the cap has
been extended for only one year.
Taxes will have been cut by $2 trillion during the Bush presidency, while
federal spending has already increased by a third. Since 2001, the gross
national debt has increased $3 trillion. The question is: Can we afford this?
And the answer is: No.
The year 2010 could be a very interesting year in a fiscally morbid sort of
(Contact Dale McFeatters at McFeattersD(at)SHNS.com)