A tax cut only the rich could loveA Times Editorial
Published May 12, 2006
By ignoring the federal deficit and manipulating their own rules, congressional Republicans have sent President Bush another round of tax cuts. The months of negotiations did not erase their fiscal irresponsibility or make them any fairer. The result is that the nation will go deeper into debt to extend tax cuts to those wealthy Americans who need help the least.
The federal deficit will exceed $300-billion this year, but Washington could not care less. Congress is adding another $70-billion in tax cuts over five years. Even that total is deceiving. Republicans held it to that number so they could pass it by a simple majority vote and avoid a filibuster. Another tax cut bill of at least another $20-billion is on the horizon, with popular tax breaks such as those for state and local taxes and college tuition.
Want more? Republicans used another gimmick to hold down the size of this tax cut as they allowed wealthier Americans to convert individual retirement accounts into Roth IRAs, which are taxed when money is put into them but enable all gains to be tax-free. That brings in to the federal government more than $6-billion in the short term, but it costs billions in the long run.
Want more? The legislation extends the reduced 15 percent tax rate for capital gains and dividends, which would have expired at the end of 2008, for two years. But the much-needed fix for the alternative minimum tax, to ensure that more middle-income families won't pay it, lasts for only one year. That demonstrates who is really important to this Congress, and it isn't the middle class.
The Urban Institute-Brookings Institution Tax Policy Center puts this giveaway in the proper context: Middle-income families will receive an average tax cut of $20. Families with incomes of more than $1-million will get average tax cuts of $42,000. Voters should remember those figures in November.
They also should remember something else that Washington conveniently forgot this week. Just three months ago, Congress approved $39-billion in cuts in entitlement programs such as Medicaid. That isn't pain distributed to reduce the federal deficit; it is subsidizing these tax cuts on the backs of low-income Americans whose voices aren't heard.
Instead, the loudest voices this week have been those of Republicans making the same unsubstantiated claims that Bush's tax cuts have stimulated the economy and led to an increase in federal tax revenues. They forget that the economy also was performing well in the 1990s when Washington was more fiscally responsible and the federal deficit dramatically declined.
All these latest tax cuts do is push tough decisions further down the road and into the lap of President Bush's successor. The alternative minimum tax, for example, originally was intended to ensure wealthier Americans paid their fair share of taxes. But it wasn't indexed for inflation and now unfairly penalizes middle-class families. It needs to be fixed, but not by avoiding a way to make up the money and using a temporary patch as cover to extend the capital gains tax cuts.
There will be a day of reckoning. Reckless tax cuts and spiraling deficits cannot continue forever. This president and this Congress are out of touch with reality, and their successors and our children will have to pay for it.