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Let’s just hope that Republicans don’t find a way to snatch defeat out of the jaws of victory. As one influential Senate aide confided in me yesterday, “We’re very close to winning, but don’t forget, we’re the party that has a tendency to shake salt on our pudding pie.”
Even better news comes from Monday’s Wall Street Journal. The front-page story screams: “Tax Cuts Are Bigger than They Look in Budget.” Ahh, music to my ears. Here is what has the Journal’s reporters all worked up:
Now here’s my favorite part:
If the dividend tax is permanently repealed, the real price tag of the tax bill is at least $700 billion. Getting the dividend tax to zero for individuals, if even for three years, is a very big deal. If you had asked me at the beginning of the year the chances of getting 51 votes in the Senate for a full elimination of the dividend tax in America, I would have said about the same likelihood of the Cubs and White Sox meeting in the World Series (which Vegas oddmakers say is a one-in-a-thousand longshot). Well, we just hit the jackpot. So what do House and Senate negotiators need to do now to take the best of both bills and pass a truly heroic and historic pro-growth tax bill? Three things: 1. Eliminate the nasty tax increases in the Senate bill. The Senate bill contains $70 billion in tax increases on American workers and firms doing business in foreign countries. These provisions are ill-designed and economically unjustified. Republicans shouldn’t be in the game of raising taxes on anyone. The House should work to pare down the size of these tax-hike offsets. 2. Provide tax relief, not $20 billion in handouts to the states. The tax cut is the best relief that Uncle Sam can possibly give to the fiscally strapped states. Sending $350 billion back to state taxpayers is a powerful stimulant to local economies. Moreover, states should cutback on their spending during these tough times after a decade of rampaging spending by governors. Most states doubled their budgets over the past 10 years. The last thing they need is free money from Congress to continue the spending spree. And what is the logic of Congress taking money from a person living in Iowa, bringing it to Washington, and then sending it back to Iowa? Why not cut taxes at the federal level as much as possible and let Iowans raise their own taxes if need be? 3. To provide more economic punch to the tax bill, cut the capital-gains tax, too. The Bush plan provided a capital-gains tax cut for those who own stock in firms that retain earnings. The House bill cuts the capital-gains tax to 15 percent. The Senate bill has neither provision. The evidence is clear that when we cut the capital-gains tax, the stock market rises and capital-gains revenues rise. This tax bill needs cut the dividend and the capital-gains tax. The House and Senate have now passed tax bills that are both explosively pro-growth and a major step forward in the never-ending battle to reform the tax system. One of the nation’s top economists, Brian Wesbury of Griffin, Kubik, and Stephens in Chicago, says this tax bill could turn out to be “The best pro-growth tax bill since the Reagan tax cut in 1981.” He also predicts that if a tax bill with the positive features of the House and Senate versions passes, we could see a strong economic and stock market recovery starting in the second half of 2003, and surging right through 2004. Republicans should like that scenario. Of course, the gamble is that once we get the dividend tax down to zero for individuals, that no one in Washington will actually be foolish enough to propose raising it back up to 35 percent in 2007. Of course, you can make a lot of money gambling that Congress will do monumentally stupid things, but in this case, I agree with the Wall Street Journal's assessment that when we get to zero, we will stay there. If the tax cutters prevail, in just three years President Bush will have succeeded in eliminating the death tax and the dividend tax while lowering the top tax rate from 40 percent to 35 percent. One step at a time, this president is taking us down the path to the promised land of a simple, fair, and pro-growth flat tax. Shhh! Don’t tell anyone. CORRECTION — Stephen Moore is president of the Club for Growth. |
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ictory on the tax bill is so close you can taste it. 
