What do Bill Clinton and Ohio Republican George Voinovich have in common? They alone have the backbone right now to suggest that not only should Congress be repealing Bush's tax cuts in the wake of Katrina, it should consider raising taxes to rescue the nation from the economic mess Bush has created. The Dems will, of course, see this idea as the kiss of political death, so don't expect it go anywhere. But what's amazing is how the proposal to repeal Bush's tax cuts—which to you and I seems like a no-brainer—continues to be treated as too radical for serious discussion by most politicians. To the rescue comes the diligent number-crunching from the Center on Budget Policy and Priorities. Yesterday they released a report showing in black and white that Bush's tax cuts "in a single year exceed the total anticipated costs of all expenses related to the hurricane over the years to come ."
Then, late yesterday, those extremists over at the Congressional Research Service released "Tax Policy Options After Katrina" (sorry, doesn't appear to be online yet). And guess what? The government-funded research service for the GOP-dominated Congress challenges the idea—being peddled by conservatives—that tax cuts offer some kind of economic stimulus that will benefit the victims of the hurricane:
In many ways, the tax system is not well suited to helping the victims in disaster areas, and direct aid may be more successful. Many low income people who may be the most needy do not pay taxes.
This morning's Congress Daily (subscription req'd.) summarizes CRS's analysis:
CRS dismisses Treasury Secretary Snow's recent assertion that making Bush's 2001 tax cuts permanent would have a positive effect on the economic situation of disaster victims, noting that many of the provisions do not expire until 2011.
The administration's proposal to make the tax cuts permanent is unlikely to have an effect ... Although there are theories that increases in permanent income will affect current spending, there is evidence that a substantial amount of current spending is related to current income ... And much of the benefit will go to higher income individuals who are less likely to spend income, especially the rate reductions, the estate tax repeal, and the lower taxes on dividends and capital gains," CRS says.
The report also warns that tax cuts might hurt the nation's economy.
"Tax cuts can, however, worsen the long-run fiscal situation of the country. The increased spending on Iraq, other spending needs, addressing problems arising with the alternative minimum tax, and extending tax cuts lead to a significant continuing deficit. In the longer run, the pressures of spending for Social Security and Medicare continue," CRS warns.
As for the emergency tax package being debated by House and Senate negotiators, CRS argues most provisions will have minimal benefits for victims and will also provide the bulk of benefits to wealthy Americans.
"In many cases, they will be specifically focused on higher income individuals," the report states, particularly since most low-income families do not have IRAs or 401(k) plans.
Even the charitable-giving provisions will have only a small effect on victims since "the ones affecting charitable giving are not directed at the disaster area. It is likely that only a small fraction of increased giving is likely to benefit the Katrina victims," CRS says.
The question of how to cover the Katrina bill has opened up some welcome debate over the Medicare prescription drug bill, the energy bill and the highway bill. And by all means, let's repeal those disastrous pieces of legislation, which are poor public policy regardless of the Katrina pricetag. But, as long as the White House floats the idea that Katrina relief should be offset by "spending cuts," a chorus should form among Dems and fiscally conservative Republicans chanting, "Read our lips: Repeal the president's tax cuts."
| Tuesday, September 20, 2005 11:47 AM