The Tax Cut: Worse Than You Think

The right’s allergy to active government has become the dominant theme in American politics. Bill Clinton’s ability as a politician was not to challenge that theme, but to operate within it. So, by 1994, Clinton and the Democratic Congress were reduced to coopting Republican ideas—less regulation, balanced budgets, reduced welfare payments, devolution to the states. By the end of the Clinton years, despite projected budget surpluses of hundreds of billions, no, trillions, of dollars, the most imaginative thing Clinton and Al Gore stood for was paying off the national debt. On most aspects of domestic policy Clinton and Gore were to the right of Richard Nixon.

George W. Bush is not Ronald Reagan. He does not have Reagan’s ability to translate ideology into warm sentiments and stirring slogans. He is simply a hard right winger. His first months in office produced a tax bill that will deliver truckloads of cash to millionaires, a bankruptcy bill for bankers, attacks on unions, reductions in public spending that will hurt the poor, environmental betrayals (discarding his campaign pledge to reduce carbon dioxide emissions), a massively flawed missile defense policy, and promises to extend the North American Free Trade Agreement to the rest of the western hemisphere.

Bush’s boldness is encouraged by the timidity of many Democrats. In 1993, when Clinton proposed to restore some modest progressivity to the federal income tax and raise rates on wealthier taxpayers, every Republican voted against it. In contrast, twenty-eight Democrats in the House and twelve in the Senate voted for Bush’s tax cut. When the smoke cleared after congressional negotiators—including key Democrats who claimed their participation would “make the outcome better”—reached agreement on a tax cut, the outcome was worse than Bush’s original proposal. Lawmakers added provisions and juggled the timing of the tax breaks in ways that will increase the cost of the bill and keep accountants gainfully employed for years to come. This nasty piece of work—which the Senate spent less time debating than it did renaming National Airport after Reagan—will make the rich richer and hurt the poor.

How bad is it? The information that follows comes from various reports published by the valuable troika of progressive think tanks in Washington: the Economic Policy Institute, the Center on Budget and Policy Priorities, and Citizens for Tax Justice. First, the tax cut, which congressional negotiators put at $1.35 trillion—is actually much larger. The $1.35 trillion figure is arrived at only by including artificial sunset provisions that no one expects to be enforced. The real cost is closer to $2 trillion for the first ten years and $4.3 trillion in the next ten years. Second, it is staggeringly regressive. More than a third of the tax cut goes to the richest 1 percent of all taxpayers, more than 70 percent goes to the top 20 percent. The top 1 percent—...