Keep the Bush tax cuts; gag candidates’ rhetoric

By JAY AMBROSE

SCRIPPS HOWARD NEWS SERVICE

Listen to the Democratic candidates for president, and you would think that President Bush’s tax cuts took money from the poor, gave it to the rich, are among the chief horrors of the 21st century and yet provide the candidates an opportunity.

Once the Republicans are ousted from the White House, several of the Democrats tell you, the winner can rescind the giveaway to wildly affluent Americans and use that bounty to finance this, that or the other wonderful, amazing, absolutely astonishing program benefiting the middle class. They say this action will help restore equity to the tax system while setting us on the road to fiscal responsibility.

The actual opportunity for the Democrats is purely political — to breed class resentment in the search for votes while piling one misrepresentation on the other. The Bush tax cuts benefited millions who are far from rich, and have been a stimulus without which this economy might well be dead in the water. The revenue gained from ending the breaks for high-income Americans wouldn’t be enough to plug holes in existing programs, much less finance a major new initiative.

The envy-wilting truth the Democrats keep trying to hide from the public is what some commentators keep trying to get across, namely that the wealthiest among us pay most federal taxes, including the payroll tax. Economist Bruce Bartlett has noted that the richest 1 percent pays more than a third of the income tax, and the top 25 percent pays more than 80 percent. Something more than 40 million working Americans pay no income tax at all, and tens of billions of dollars are distributed as credits to lower-income workers who owe no income tax.

Tax cuts benefit middle class

Did the Bush tax cuts reverse this? Just the opposite. Lawrence Lindsey, who helped fashion the cuts while serving in the Bush administration, has observed with others that “the share of income paid by the top 1 percent, 5 percent and 10 percent of taxpayers has moved up” since the cuts were enacted. Concurrently, middle-income taxpayers have had a substantially lighter load owing to such measures as increases in the credit for having a child.

“The focus of the early tax cuts was on families with children, people with high propensities to spend,” Lindsey wrote in a Wall Street Journal piece. “A typical middle-class couple with two children got a minimum of $1,600 in relief, equivalent to a 4 percent increase in their real take-home pay ...”

Lindsey thinks the evidence good that the cuts, by putting more money in the hands of consumers inclined to spend it, has been a major factor in helping the country work its way out of economic difficulties. Another economist of supply-side persuasion, Lawrence Kudlow, says the good news keeps coming, most lately in the form of a 3.8 percent, second-quarter growth rate, an astounding, important figure that points to better quality of life for one and all. There’s negative economic news, such as rising oil prices and a drastically declining dollar. But the Bush tax cuts of 2003, Kudlow says, have continued “to encourage investment and entrepreneurship.”

So why not get in the way of this powerful engine producing public blessings by jacking up income, capital-gains and other taxes on Americans earning $200,000 and more? That’s what the Democratic candidates pledge to do, as if no one had cited evidence that lowering top marginal tax rates has helped provide our economy with a quarter-century’s worth of virtually uninterrupted expansion.

The pretense of the candidates is that they can use the additional revenue to generate happiness. Barack Obama and Hillary Rodham Clinton have both said it would be a means of financing universal health insurance. They should listen to Eugene Steuerle, a former Treasury official now at the Urban Institute, who has written that rescinding those cuts would produce no more than $50 billion a year, which wouldn’t come close to meeting the Social Security shortfall or rescuing us from the growing, unsustainable costs of Medicare.

X Jay Ambrose, formerly Washington director of editorial policy for Scripps Howard newspapers , is a columnist living in Colorado.