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TAX CUT POSTURING



Published: Fri, April 26, 2002 @ 12:00 a.m.



Minneapolis-St. Paul Star Tribune: In Bushspeak, Democrats who oppose making last year's gargantuan tax cut permanent are pushing for a tax increase. A more accurate description is that they are pushing for a return to fiscal sanity. The nation's fiscal health requires that the Democrats in the Senate refuse to go along with the Republicans in the House who last week approved making permanent the tax-cut provisions scheduled to expire in 2010.

Fortunately, Senate Democrats appear willing, even eager, to play their proper role, and "role" is definitely the word. This tax-cut talk is all about posturing for the fall election. The Republicans know there will be no tax action, this year. They simply want a platform from which to campaign as champions of lower taxes. The Democrats want to campaign against the cuts as a threat to Social Security, Medicare and other popular nondefense programs.

The Democrats have the argument: Because of the war on terrorism and the related large increases for defense spending that Bush wants, and also because of the recession, Washington can't balance its books even in the near term and still pay for the existing tax cut while protecting Social Security and Medicare. Extending the cuts would court disaster.

Fiscal hole

President Bush is employing a variant of the squeeze President Ronald Reagan used in the early 1980s: Through tax cuts and defense spending increases, dig a fiscal hole from which the nation can extricate itself only by applying vise-like restrictions on most domestic spending. Here's hoping the Democrats are acquainted with the adage, "Fool me once, shame on you; fool me twice, shame on me."

But what you won't hear the Democrats say this year, though they should, is that instead of extending the tax cut, large chunks of it ought to be repealed. There are two reasons for this.

First, all the arguments aligned against the 2001 tax cut while it was being debated remain relevant: The cuts give back money to the wealthiest Americans in amounts disproportionate to the amount of the tax burden they bear; they drain trillions of dollars from the Social Security fund, putting at risk the government's ability to keep its financial commitment to the baby boomer generation nearing retirement; they postpone repayment of the national debt, and they threaten Washington's ability to provide essential services to the American people -- including Medicare.

The second reason for repeal is the politics of the issue going forward. For example, the cockamamie scheme that has the estate tax disappear in 2010 only to reappear in 2011 will make it impossible in 2010 to reject the cuts' continuation. The momentum will be overwhelming, so large will the difference be between tax burdens in 2010 and 2011. The Republicans will, inaccurately, call the 2010 tax levels an unprecedented tax increase, and they will find many believers. To avoid that tax disaster, the Democrats must scale back the cuts before they take full effect. For this year, the battle is to avoid an extension. Next year, repeal should take center stage.




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