Latest Tax Cuts Are Not a Wash
One might think that passage of a $146 billion tax cut just before an election in which tax cuts are a big issue might have stirred up angry campaign sound bites about its effect on the deficit. Not so. The reason? Both Democrats and Republicans in Congress voted overwhelmingly last week for this grab bag of tax-reducing goodies.
The measure will be the fourth tax cut that President Bush has signed since taking office. John Kerry supported it, and even proposes middle-class tax cuts of his own. The issue of tax cuts seems to have drifted away from a question of whether to cut and toward a question of what to cut.
The centerpiece of the latest tax bill is an extension of cuts that were due to expire at the end of the year: relief from the "marriage penalty," an increase in the child tax credit to $1,000, and the expansion of the 10 percent tax bracket for low-income folks. In addition, it offers some relief from the alternative minimum tax, and provides tax incentives for hiring people on welfare, for certain types of research, and for energy production from wind and farm waste.
The GOP designed the bill to be difficult for Democrats to oppose. Who wants to be charged with "raising taxes" while stumping for votes? But the real problem with its passage isn't the type of tax cuts. Rather, both parties faltered when neither one took a strong stand by saying, "Let's cut some spending to offset these cuts."
At some point, Congress must beware of driving up the deficit to the point where government borrowing raises interest rates for business and consumers, hurting the economy. Lawmakers need to return to the discipline of "paying" for tax cuts by cutting spending. It's the kind of fiscal balance that voters expect of them.