Tax Cuts for Taxpayers


President George W. Bush is pushing his tax cut, and the usual suspects,ranging from Democratic hacks to liberal pundits, have reacted in horror.Imagine! Giving tax cuts to those who actually pay taxes.

The presidential centerpiece is an across-the-board rate reduction. No moresocial engineering. Rather than dribbling cash to people who, likelaboratory rats, push one lever or another, the administration would lettaxpayers decide how to use their own money.

This is reason enough for critics to yelp. Even worse, though, is the factthat wealthier people receive back more money. The class warriors are infull battle cry.

William Gale of the Brookings Institution complains: "The president's planis huge, back-loaded and tilted dramatically toward the highest-incomehouseholds."

Senate Minority Leader Tom Daschle, D-S.D., says with their return, the richwould be able to buy a Lexus, while the poor could purchase only a mufflerfor a used car.

Well, now. There's a reason across-the-board cuts "favor" the rich. Therich pay more in taxes. A lot more.

The top 1 percent of taxpayers pay about one-third of all income taxes. Thetop 5 percent pay more than half. The top 10 percent pay nearly two-thirds.The top 25 percent pay more than $4 of every $5.

Occasionally, the purveyors of envy acknowledge this inconvenient fact. Yes,admits Washington Post columnist E.J. Dionne Jr., "the wealthy pay the mosttaxes," but "they have also made the greatest gains in the past decade."

Eh? Let's run through this one more time. Tax cuts should go to people whopay taxes. It doesn't matter whether their incomes have gone up or down.

Indeed, the fact that some higher-income people made great gains in the1990s means that they are paying even more in taxes. So, they should receivemore back.

They should, that is, unless one believes that Uncle Sam is the greatbenefactor who generously allowed them to earn more. And, that all moneyreally belongs to the government, so increased earnings are the equivalentof a tax cut.

The best argument wheeled out by critics is: "What about the payroll tax?"This regressive levy falls most heavily on lower-income people.

Good point, but few of these born-again tax-cutters previously evinced theslightest interest in reducing the tax burden on anyone. They wanted tospend all of the loot collected by Uncle Sam.

Only now, worried that some cash might be returned to those who earned it,have tax cut critics discovered the plight of wage-earners. Which they citeonly as a reason not to cut income levies.

The payroll tax is an awful burden, a regressive disincentive to employment.But, it should be addressed while reforming Social Security.

The system is heading toward bankruptcy, set to run out of money in littlemore than a decade. Many new workers will actually receive a negativereturn. Payroll taxes should be reduced by allowing people to shift moneyinto personal retirement accounts.

Income tax cuts are a moral imperative. Americans bear the highest peacetimetax burden in history. In the face of a possible economic slowdown, UncleSam continues to grossly overcharge taxpayers.

Moreover, the looming surplus provides an irresistible honey pot forirresponsible legislators. Including the Republicans who control Congress.

As Cato Institute scholars Stephen Moore and Stephen Slivinski point out,the last Congress was "the largest-spending Congress on domestic socialprograms since the late 1970s when Jimmy Carter sat in the Oval Office andThomas 'Tip' O'Neill was speaker of the House." For three years, the budgetof every Cabinet department has grown up to five times the rate ofinflation. No wonder Mitch Daniels, director of the Office of Management andBudget, speaks of the need for spending restraint.

Huge and unjustified tax hikes were the hallmark of both the original Bushand the Clinton presidencies. This President Bush seems determined to createa different record.

Indeed, his proposal for a 10-year, $1.6 trillion tax cut is too modest. Itis just half of the estimated surplus over the same period, which doesn'tinclude savings from even modest spending restraint.

Moreover, as a percentage of GDP, the Bush plan is only half the size ofJohn F. Kennedy's rate reduction and one-third the size of Ronald Reagan'stax cut. Bush would provide less relief than was pushed by congressionalDemocrats in 1981, according to Eric Schlecht of the National TaxpayersUnion.

Thus, Congress should slash taxes even more, deepening the proposed ratereductions and eliminating the hikes imposed by the elder Bush and Clinton.

Taxes have been going up for a decade. It is time to lower them. For peoplewho actually pay taxes.