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May
23, 2003 6:45 a.m.
A
Tax Cut Worth Cheering
It
will boost the economy — and Bush.
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he tax-cut compromise that has been worked out in conference is a triumph
for pro-growth economic policy. All pro-growth Republicans should support
this tax cut enthusiastically.
Yes,
this tax cut is not as large as many of us would have liked, and thus it
may not provide a huge immediate stimulus (but it will help in both the
short- and long-term). And yes the tax-cut package has some severe drawbacks
— most notably the $20 billion give-away in funding to the states.
But on balance,
it is the most pro-growth tax legislation since President Reagan’s 1981
tax cut. It has four extremely positive pro-growth features:
1.
It cuts the dividend tax to 15 percent immediately.
2. It cuts
the capital-gains tax to 15 percent immediately.
3. It cuts
the top income tax rate from 39 percent to 35 percent.
4. It front-loads
all the tax cuts so they take place right now — when the economy
needs the steroid boost. This is in contrast to the 2001 tax bill, which
foolishly back-loaded the tax cuts and thus stunted their impact.
Also, the real 10-year
price-tag on the package will be larger than $350 billion, because there
is a high likelihood that the tax cuts will be made permanent in 2007
— as they should be. The Wall Street Journal's front-page
story of May 18 agreed. The headline read: “Tax Cuts Are Bigger than They
Look in Budget.”
Many of my most
reliable allies in the House moan that the tax bill is too small and has
too much spending. I'm sympathetic. Yet this is the best that we could
have possibly hoped for given the narrow Republican majority in the Senate
and the ideological make-up of the upper chamber. This is a victory, one
made up of rate cuts on capital gains, dividends, and income taxes. Republicans
should take it to the bank and fight for full dividend-tax repeal after
the elections.
One last point:
The fact that the Daschle-Pelosi Democrats, with a few notable exceptions,
are almost unanimously against the tax cut, is indication that the party
has become reflexively opposed to wealth and job-creating tax cuts. The
Democrats are no longer the party of prosperity and tax cuts as they were
under JFK. They are now the party of income redistribution, class warfare,
and austerity economics. They lost because they are devoid of any alternative
economic-growth policies that American voters find even semi-plausible.
As such, this tax
cut is a profound economic and policy triumph for President Bush and Republicans
in Congress. And it is an even greater victory for American taxpayers,
workers, and investors.
—
Stephen Moore is a senior fellow at the Cato Institute and president of
the Club for Growth.
Thomas W. Smith is chairman of the board, National Center for Policy Analysis
(NCPA), and senior partner, Prescott Investors.
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