Tax Cuts? A Little Reality
Edmund Andrews does a very nice job saying why the mantra over making the Bush tax cuts permanent is just silly:
REGARDLESS of who wins the election this fall, the next president and the next Congress will face at least three wrenching decisions that could reshape the nation’s tax system for years to come. The looming battles are over questions that both parties have been ducking for years. How much should Americans pay in taxes to get what they want? How should the tax burden be distributed between wealthy and poor, businesses and individuals, savers and investors? And the decisions are becoming harder to avoid, because they involve huge tax cuts that will disappear if Congress fails to act. The first issue is the future of President Bush’s tax cuts, all of which are scheduled to expire at the end of 2010. Those include lower rates for every income level; tax breaks for two-income families with children; an elimination of the estate tax on inherited wealth; and Mr. Bush’s signature tax cuts on stock dividends and capital gains. Extending them would reduce revenues by about $3 trillion over the next 10 years, according to the Congressional Budget Office. Those reductions would coincide with sharply rising costs for Social Security and Medicare as millions of baby boomers enter retirement … That percentage sank to 16.3 percent of the G.D.P. in 2004, largely because of Mr. Bush’s tax cuts, but it edged up to 18.8 percent last year as a result of booming corporate profits and investment income. But government spending remains above 20 percent of G.D.P., and the gap between taxes and spending is likely to widen sharply as a result of the economic slowdown this year.
Andrews not only mocks the supply-side silliness of McCain (as well as Romney) but then he turns on Clinton and Obama as well:
The Democratic contenders, Senator Barack Obama and Senator Hillary Rodham Clinton, would extend the tax cuts for most people but revoke them for families earning more than $250,000 a year. “I am not bashful about that,” Mr. Obama said at the Democratic candidates’ debate on Jan. 31. “What we have right now is a situation where we cut taxes for people who don’t need them.” … Democrats have been inconsistent themselves. In Congress, they have embraced “pay as you go” rules, which require lawmakers to pay for the cost of tax cuts with either tax increases or spending cuts, but the Democratic presidential candidates have yet to explain how they would simultaneously pay for a permanent fix to the A.M.T., an extension of Mr. Bush’s tax cuts for the middle class, and their own plans for universal health care. Mrs. Clinton and Mr. Obama have both vowed that they would raise tax rates on families in the top two income brackets, with the top tax rate climbing back to 39.6 percent from 35 percent today. But both have indicated that they would use that money to pay for expanded health care.
Andrews does have kind words for Charles Rangel:
For a preview of the clash over revenue, consider the $882 billion tax overhaul proposed last fall by Representative Charles Rangel, Democrat of New York and chairman of the House Ways and Means Committee. Mr. Rangel, going slightly further than Mrs. Clinton and Mr. Obama, would effectively revoke the Bush tax cuts for families earning more than $200,000 a year. Unlike the presidential candidates, however, Mr. Rangel would use almost all of that money to eliminate the alternative minimum tax, leaving none for an expansion of health care. Mr. Rangel and other House Democratic leaders show no interest in picking a fight over the issue before the fall elections. But when the dust settles and a new president takes over, the challenge will be hard to avoid.
If the Democrats do well in the 2008 elections, I’d pay very close attention to what Congressman Rangel is saying.