Better Late than Never

I just caught this from a 2/27 NYT piece:

The [Bush tax] plan’s centerpiece would slash taxes on corporate dividends at a cost to the Treasury of $335 billion through 2012. It also calls for immediately implementing income tax cuts that are scheduled for a gradual phase-in, as well as accelerating tax breaks for married couples and couples with children. The package would expand the value of purchases that small businesses can deduct from their taxes.

“There can’t be any doubt about the fact that the American economy needs a boost,” said Treasury Secretary John W. Snow, “and there can’t be any doubt that this package will provide that boost.”

The problem with the Treasury Secretary’s statement is that most of the proposals are not stimulative. Accelerating future tax cuts has little impact on the current recession unless they are accelerated into the present (they aren’t). Making the estate tax elimination permanent has no immediate effect. Cutting dividend taxes doesn’t do much now–such a cut has more of an effect when corporate profits are high (so that there are dividends to distribute tax free), but corporate profits are by definition low, not high, during a recession. More hypocrisy: Snow was a strong advocate of a balanced budget in the mid-1990s.