Congress has passed a 10-year $792 billion tax cut bill that President Clinton has criticized as "gargantuan" and has vowed to veto. The tax cut is actually small, and is justified. It does not even offset projected growth in federal taxes over the next decade, or use any of the $2 trillion of projected excess Social Security tax revenue. Thus it is a very modest effort to give something back to taxpayers.

• The tax cut phases in very slowly and averages just 0.6 percent of Gross Domestic Product (GDP) over the 1999-2009 period, with a peak impact of 1.3 percent in 2008.

• It will be at least 2003 before the 1999 tax cut and the tax cut of 1997 together offset the impact of the 1993 tax increase -- and in 2008, revenues will still be far above the postwar average (see Figure II).

• Generally, taxpayers would get a tax cut proportionate to the taxes they pay -- and the share of taxes paid by each income class would not change (see Figure VI).

The bulk of tax relief in the bill is an across-the-board reduction in statutory tax rates. Each rate, from 15 percent at the bottom to 39.6 percent at the top, would fall by one percentage point.

Also, the bill would phase out the U.S. estate tax, which often falls most heavily on family farms and businesses that must be sold to pay the tax collector. It indexes capital gains so illusory gains from inflation aren't taxed. It relieves the marriage penalty that occurs when a two-earner couple pays more federal taxes than they would if taxed as single persons. And it increases individual retirement account (IRA) limits from $2,000 per year to $5,000.

In addition, it phases out the Alternative Minimum Tax, which individuals with too many deductions are required to pay, and it extends the business Research and Development tax credit five years.

Source: Bruce Bartlett (NCPA senior fellow), "The Case for the Tax Cut," NCPA Policy Report No. 226, August 1999, National Center for Policy Analysis, 12655 N. Central Expwy., Suite 720, Dallas, Texas 75251, (972) 386-6272.

For text http://www.ncpa.org/studies/s226/s226.html