George W. Bush took a major step toward reclaiming the tax issue for
Republicans by proposing to cut income-tax rates for everyone. Unlike the
congressional Republicans, Bush has been nervy enough to suggest cutting
the top tax rates: He would replace the 39.6 and 36 percent rates with one
33 percent rate. The lowest tax rate, meanwhile, would drop from 15 to 10
percent. Bush would make some other bold moves as well: He would end the
estate tax and the tax on Social Security benefits (which punishes senior
citizens who work). And, as he had announced before, he would let families
save up to $5,000 a year tax-free to finance their children's education.
The plan has two trouble spots. First, it doubles the child tax credit to
$1,000. That would take 6 million families off the income-tax rolls
entirely, which might burnish the governor's compassion credentials, but
would not serve the long-term strategic interest of conservatives. Second,
Bush tries to ameliorate the marriage penalty by providing a 10 percent
deduction for two-earner couples. This policy would put single-earner
couples at a disadvantage, which is why feminists originally proposed it.
The social conservatives who have campaigned against the marriage penalty
can hardly be pleased with this proposal.
The worst flaw in Bush's plan, however, is one of omission: There is
nothing here about IRAs, 401(k)s, capital-gains taxes, or medical-savings
accounts. The rise of the investor class is one of the most striking
features of our economy, and a huge opportunity for Republicans. So far,
Bush isn't talking to it.
