No Fiscal Sense in Tax Plan
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No Fiscal Sense in Tax Plan
Los Angeles 0aTimes | Editorial
Thursday 23 May 2003
The new $350-billion House-Senate package is yet another boon to the well-to-do.
If a family is running a huge credit card debt, does it make 0asense to call Visa or MasterCard to order a fistful of gold cards? That's just 0awhat the Bush administration and Congress are doing. Federal Reserve Chairman 0aAlan Greenspan testified again to Congress on Wednesday that deficits "do 0amatter" because they create pressure to increase interest rates. No matter.
While the administration seeks a record $984-billion rise in the 0afederal debt ceiling, Senate and House Republicans handed President Bush their 0aagreement on a new tax cut of $350 billion, aiming to get a final vote before 0aMemorial Day. Holding to even that amount depends on the smoke and mirrors of "sunset" provisions.
The provisional agreement sticks closely to the plan created by 0aHouse Ways and Means Committee Chairman Bill Thomas (R-Bakersfield) for cutting 0athe dividend and capital gains tax to 15%. Currently, dividends are taxed as 0aordinary income and gains at up to 20%.
The package that is being negotiated has some little pluses for 0aworking families. It contains $20 billion for cash-strapped states and $11.9 0abillion in child tax credits; the current credit of $600 per child would be 0aincreased to $1,000. But in their desperation to keep the debt down, negotiators 0aagreed on keeping the credit only through 2005. The reduction of the dividend 0atax and capital gains tax would last a few years longer. However, guess what 0aisn't getting phased out? The accelerated reductions in the top income tax 0arates.
Under the House-Senate agreement, 50% of families would average $100 or less in tax relief barely enough for a Dodger game. Households with 0aincomes of more than $1 million would get an average tax cut in 2003 of $93,500. 0aSure, the wealthy pay more in taxes to begin with, but the plan is stacked to 0aensure that the wealthy get as much as possible even more, proportionately, 0athan under Bush's original demand for $726 billion in tax cuts. So the question 0aremains: Why do the prosperous get to bask, while middle-income and poor 0afamilies are frozen out by sunsets? On the other hand, if the sunsets are 0acanceled in coming years, which is all too likely, the cuts become even more 0aunaffordable to the nation.
The tax package was trimmed slightly at the last minute for the 0asake of moderates like Sen. George Voinovich (R-Ohio) who were unwilling to 0aaccept more than $350 billion in cuts. But lawmakers remain oblivious to the 0aconsequences of piling on debt even as the $6.4-trillion federal debt ceiling 0ahas to be raised again, in part because of tax cuts already in effect. And the 0acosts of rebuilding Iraq haven't begun to be tallied.
Families across America are at least as worried as Greenspan, so 0acommon sense hasn't vanished everywhere. Only in Washington.
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