One of the things to look forward to in the new year is the potential for more federal tax cuts. President Bush is expected to push Congress to enact new savings programs that rely on tax breaks to lure participants, reported Monday’s Sacramento Bee. The president is also expected to push Congress to extend the provisions of the 2003 tax cuts so they will go beyond 2004.
Despite the braying of Democrats, there is no mystery to the president ’s continued emphasis on tax cuts.
Most important, tax cuts produce prosperity. The economic upsurge we’ re now enjoying began after the capital gains and dividend tax cuts of last spring. It’ s easy to understand: When people keep more of their own hard-earned money, they often spend it, which gives a jolt to the economy. Governments spend money, too, but their money is taken from individuals, who no longer have the money to spend and invest.
Second, tax cuts remain popular with voters. Despite what individuals might tell pollsters, voters tend to reward politicians who protect their pocketbooks.
So far, the president’ s potential Democratic rivals have not gotten the message. Front-runner Howard Dean, the former governor of Vermont, has proposed repealing all of the Bush tax cuts, which he said are part of a radical agenda to dismantle Social Security, Medicare and our public schools through financial starvation.
But repealing the Bush tax cuts would mean tax increases on almost all Americans, jacking the top income tax rate back up to 38 percent from 35 percent, cutting the child tax credit back to $700 from $1,000 and raising the top capital-gains tax — paid not just by the wealthy but by many middle-class taxpayers — to 20 percent from 15 percent.
Families and industry, which just now are enjoying the fruits of the tax cuts, would be slammed against a wall.
Two other Democratic candidates, Sens. John Edwards of North Carolina and John Kerry of Massachusetts, want to repeal only the tax cuts that went to wealthy Americans. But even that would mean the wealthy would have less money to invest in companies that produce jobs. Democrats are unlikely to recapture the White House until they again take the side of taxpayers. They forget that Bill Clinton won in 1992 in part by promising a middle-class tax cut.