A Little Perspective
The president pushed so hard to pass at least $550b in tax cats that Democrats will surely claim victory when the tax cut likely comes in at $350b (down from an original proposal of $726b). When they do, keep in mind that that even at $350b, it will be the third largest in history, on top of the largest in history in 2001.
Also, as the NYT story explains, even a bill that only costs $350b will only hit that number via the disengenuous practice of built in sunsets. For example, if you’re worried about paying estate taxes, be sure to die on or before 12/31/2010, as that’s when the estate tax repeal expires. (2010 and 2011 will provide a great test of the extent to which economic incentives to affect behavior). Building the 2010 sunsets into the 2001 tax cut allowed the Bush administration to cite only 9 years of costs as the “10-year cost of the tax cut”. (I don’t have the link on hand, but Somerby’s got a bunch of incomparable posts on this subject). Look for more of the same from the conference committee as the final bill takes shape.
And did I say that Grassley’s $500 dividend income exclusion proposal was pretty reasonable? (Yes, I did, in a post called “Credit Where it’s Due“). Now, as further proof that I was right and it is a reasonable proposal, there’s the fact that Republicans found a tax cut they don’t love:
The bill that came out of the Finance Committee would exclude from taxes each year the first $500 in dividends an investor receives and exclude part of dividends above $500 — 10 percent through 2007 and 20 percent thereafter.
This is too paltry to affect the economy or the stock market and would be of little help to the wealthy investors in the Republican camp. So Republican senators say they will try to expand the exclusion in amendments on the Senate floor. If they do not succeed next week, it is unlikely they will fare better when the bill comes out of conference.
The message appears to be that any tax cut has to be big and really skewed upwards or forget it