Cato Daily Dispatch for December 9, 2005
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Dividends and Capital Gains Tax Cuts PassedRepublicans Push for Renewing the PATRIOT Act
Government Spending after Hurricane Katrina
Dividends and Capital Gains Tax Cuts Passed
"The House approved [Thursday] $56 billion in tax cuts that would keep alive the deep reductions in the tax rates on dividends and capital gains passed in 2003, but the measure is certain to be challenged by senators who have so far balked at the tax cuts for investors," reports The Washington Post. "The bill passed largely along party lines, 234 to 197, after a rancorous partisan debate. The tax measure's cost would more than offset the savings in a tough budget approved by the House last month."
In "Dividend Taxation: U.S. Has the Second Highest Rate," Chris Edwards, Cato's director of tax policy studies, writes: "Dividend tax cuts would boost the stock market, lessen the tax code bias against savings, and reduce incentives for firms to take on too much debt and to excessively retain earnings. Nearly all major nations allow full or partial relief of dividend double taxation, and thus have lower top dividend tax rates than the United States."
Edwards continues: "High dividend tax rates add to the income tax code's general bias against savings and investment. That bias reduces U.S. economic growth and is becoming increasingly out-of-step with the tax structures of other nations. Indeed, there is a global trend toward lower statutory tax rates on all forms of capital income, including corporate income taxes and individual taxes on dividends and capital gains. [T]he United States has the fourth highest corporate tax rate in the world. Or consider that numerous countries have tax rates of zero percent on individual capital gains, including Hong Kong, the Netherlands, New Zealand, and Taiwan. Zero is much lower than the 20 percent U.S. rate on capital gains."
Republicans Push for Renewing the PATRIOT Act
"Republican legislators in the House and Senate reached a tentative agreement [Thursday] to reauthorize the USA PATRIOT Act before the surveillance law expires at the end of this month," according to The Boston Globe.
"Under the agreement, most parts of the PATRIOT Act would be made permanent, while several of its more disputed provisions would expire at the end of 2009 if members of Congress decided not to authorize them again. The Bush administration and House Republicans had been pushing to extend those powers for 10 years, but settled for the Senate's preference for shorter terms."
In "Why Reward Failure?," Timothy Lynch, director of Cato's Project on Criminal Justice, questions the FBI's performance record when using the PATRIOT Act: "In June, the inspector general release[d] his findings regarding the FBI's inability to detect and disrupt the September 11, 2001 terrorist attacks. The inspector's ultimate conclusion -- that the attacks represented a 'significant failure' by the FBI -- surprised no one. [In October], a Freedom of Information Act lawsuit revealed that the [FBI] is presently investigating hundreds of potential violations relating to its use of secret surveillance operations. Hundreds? Had this lawsuit not been filed, it is highly unlikely that the FBI would have ever brought these problems to the attention of Congress or the press."
Government Spending after Hurricane Katrina
"A senator leading an investigation into the government's response to Hurricane Katrina questioned whether requests after the storm by New Orleans officials for golf carts, air conditioners and travel aid were necessary," the Associated Press reports.
"'Are these typical of the requests that you would expect to get from state and local governments to FEMA in the aftermath of a disaster?' asked [Senator Susan] Collins, R-ME. Documents released Thursday by Republican aides to a Senate committee show that New Orleans Mayor Ray Nagin's administration also asked for hundreds of laptop computers, patrol cars, handcuffs and guns for police."
In "Congress Should Make Some Sacrifices, Too," Stephen Slivinski, director of Cato's budget studies, writes: "There's no reason why money spent on natural-disaster relief should not compete with spending in other areas of government. If the relief spending is truly more necessary than other programs in the budget, then those less essential programs should be pared back to make room for it. Congress does not seem concerned about how the federal government (read: taxpayers) is going to pay for any of this. Yet now is exactly the time to figure that out. Charity does require sacrifice, even from big-spending politicians using other people's money for charitable purposes."
Greg Garner, editor, ggarner@cato.org
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