Opinion Editorial | |
| Wednesday, September 30, 1998 | |
Politicians Playing Tax Cut Party Games |
One reason voters have become so cynical about Washington is that so
often they see their leaders treating serious public policy issues as mere
political games. A case in point is tax policy. On Saturday, the House
of Representatives passed a tax bill that both its supporters and opponents
know is not serious legislation. It has no chance whatsoever of becoming
law, because Bill Clinton will veto it, and was designed just to give Republicans
an election issue. For their part, Democrats opposed it using arguments
that they knew were not true. To start with, although federal taxes are now at their highest level
in American history, House Republicans proposed a minuscule $80 billion
tax cut over 10 years. To put that number in context it is worth knowing
that the Congressional Budget Office projects revenues of $22.4 trillion
over this period. The Republican bill, therefore, constitutes a cut of
just 0.3 percent, virtually nothing in an economy that will generate $108
trillion in output over the next decade. To be sure, a tax bill does not necessarily have to be large in dollar
terms to have significant effects on the economy. And even within an $80
billion constraint one could have designed a tax bill that addresses serious
economic problems. But this was not done. Instead, Republicans wrote a
tax bill designed solely to embarrass Democrats. New York Congressman Charles
Rangel, the House Ways and Means Committee's ranking Democrat, even complained
that Republicans had "hijacked Democratic tax cut ideas." Looking at specifics of the legislation, Republicans claim to be reducing
the marriage penalty, a serious tax problem that only affects two-earner
couples. But their solution, an increase in the standard deduction for
married couples, only impacts on the marriage penalty by chance. It gives
a tax cut to many married couples, including single-earner couples, that
are completely unaffected by the marriage penalty. And the cuts go only
to those who do not itemize deductions, which further limits its effect
on those actually suffering from a marriage penalty. In short, this is
a case of false advertising. The second major item in the Republican plan is a tiny exclusion of interest
and dividends from taxation ($200 for singles, $400 for couples). This
will do absolutely nothing to encourage new saving and investment and mainly
rewards people on saving and investment they did in the past. It is simply
a tax cut for people who tend to vote Republican, nothing more. Finally, everyone who has ever worked on tax legislation knows that they
take many months to get through Congress. Any serious effort to cut taxes
this year, therefore, would need to have been started in the Spring, not
two weeks before Congress is scheduled to adjourn. As disingenuous as the Republicans have been on taxes, however, the Democrats
have been worse. They know that although the Republican plan is superficial,
it probably will play in Peoria. And since we are running a budget surplus
they could not say it will increase the deficit, so they had to find another
justification for opposing a tax cut. No doubt based on polling and focus
groups, Democrats decided to make Social Security the issue, claiming that
the tax cut somehow threatens it. But the Democrats know perfectly well that the tax bill does not affect
Social Security one way or another. No one's benefits are affected in any
way. It was all just a political ploy to divert attention from the ever-mounting
federal tax burden and the serious problems in the tax code -- issues that
Democrats know play to the Republicans' advantage. It's enough to make anyone cynical about politics. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis,
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