Tax Issues

Why Is The Case For Tax Cuts Failing?

Observers were puzzled by the lukewarm support for the $782 billion tax cut Congress passed last year. Prompted by an article by Bruce Bartlett, a senior fellow at the National Center for Policy Analysis, the Heritage Foundation sponsored a discussion by experts on why the case for tax cuts is failing.

Bartlett pointed out that polls in recent years show tax cuts are not people's top priority for government -- they always come in, at best, third or fourth. This even appears to be true of conservatives: Heritage Foundation supporters said in a recent poll that of the domestic policy issues on which Heritage should focus, tax reform ranks fourth.

Bartlett suggested various reasons why people may not be particularly concerned about tax cuts. For instance, increasing stock market wealth raises their implicit income so they don't feel taxes are so burdensome.

  • Furthermore, since supply-side tax cuts lowered rates, the top 10 percent of taxpayers are now paying over 60 percent of federal income taxes.

  • Everybody else is paying less -- in fact, the average tax rate has fallen, especially for people of low and moderate incomes.

  • And at the same time, the rich, even though they are paying higher average rates, are actually paying lower marginal rates on each additional dollar earned.

Panelist Stan Collender suggested people prefer paying down the debt to tax cuts because they think it would keep interest rates down, cutting the cost of mortgages.

But Grover Norquist pointed to successful tax cutting campaigns: Virginia Gov. Jim Gilmore won by focusing on repeal of the car tax. And voters in Washington State passed an initiative requiring voter approval to raise state or local taxes. This shows the opportunity to vote against tax increases, or for repeal of a specific tax, is popular.

Source: Bruce Bartlett (NCPA), Stanley Collender (Fleishman-Hillard), and Grover Norquist (Americans for Tax Reform), "Why The Case For Tax Cuts Is Failing (And What Should Be Done About It)," Heritage Lecture No. 655, February 8, 2000, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400.

For text http://www.heritage.org/Research/Taxes/hl655.cfm

For Bartlett Policy Review article http://www.policyreview.com/dec99/bartlett.html

For more on Current Tax Legislation http://www.ncpa.org/pi/congress/cong2.html

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