The best way to view the $1.3 trillion Bush tax cut is in light of the road
we were going down without a tax cut.
Scott Hodge, executive director of the Tax Foundation, puts the bottom line
of the Clinton era in plain words: “Over the past eight years, federal income
tax collections have grown 64 percent faster than the growth of personal
The federal government, in short, has been growing faster than the
economy, faster than our paychecks.
Our incomes, in other words, have become increasingly socialized with each
passing tax hike, up to the point where we’re now at a 50-50 paycheck split
with the government. Data from the Bureau of Economic Analysis shows that a
full 49 cents of each dollar of increase in personal income since 1992 went
to taxes – 18 cents to federal income taxes, 15 cents to all other federal
taxes and 16 cents to state and local taxes. And that’s not counting the
hidden tax of ever-expanding regulatory costs, the price of all the countless
rules that drive up business and consumer costs.
The cost of those regulations per family? The Office of Management and
Budget, the White House’s own budgetary agency, puts the price of federal
regulations at over $300 billion annually. Economics professor Thomas Hopkins
at the Rochester Institute of Technology says it’s closer to $700 billion.
Either way, those estimates translate into an average regulatory cost of
$3,000 or $7,000 per household each year, not counting the cost of state and
Looking only at taxes, excluding the cost of regulations, the official
numbers from the Congressional Budget Office show the federal government
consistently grabbing a bigger piece of the economic pie over the past
decade: “This year, 2001, will mark the ninth consecutive year in which the
growth of federal revenues outstripped the growth of the nation’s gross
domestic product (GDP). From 1994 to 2000, for instance, federal revenues as
a share of GDP rose from 18.1 percent to 20.6 percent, a level exceeded only
once, in 1944″ – a level of government exceeded, in other words, only when
we were simultaneously at war with Japan and the Third Reich.
Arguing for the Bush tax cut, Rep. Vito Fossella, a Republican representing
Brooklyn and Staten Island, pointed to the money this growth in federal
taxation takes out of the average family’s budget: “With federal taxes today
at their highest level ever during peacetime, families are paying more to the
government than they spend on food, clothing and shelter combined.”
Columnist Paul Craig Roberts, a former Assistant Secretary of the U.S.
Treasury, states the case in more medieval terms. “The lord of the manor
could claim as much as one-third of a serf’s working time. A slave, worse off
than a serf, faced a tax rate of about 50 percent. Altogether, the combined
tax rate for low-income Americans – a Social Security and Medicare tax rate
of 15.3 percent, a federal income tax rate of 15 percent, federal excise
taxes, state income and sales taxes, and local property taxes – exceeds the
burden borne by a medieval serf. With a tax burden in excess of 50 percent,
upper-income Americans are exploited like 19th century slaves. Bush’s tax cut
merely raises America’s successful class from slavery to serfdom.”
And so, after all this disproportionate growth in government and taxation,
now comes a tax cut that the editorial writers at The New York Times call
“enormous.” In fact, the 10-year tax cut of $1.3 trillion equals only
one-fourth of the projected D.C. budget surplus, less than 5 percent of
forecasted federal tax revenues, and less than 1 percent of the projected GDP
over the same 10 years.
Rather than being “enormous,” the tax bill does little more than bring down
in the next decade what was raised up in the past decade. Had the growth rate
of income tax collections been held to the same growth rate of personal
income over the past eight years, for example, taxpayers would have saved
nearly $1 trillion in taxes, about the same amount per year that taxes are
now projected to be cut over the next 10 years.
Again, there’s no shortage of rage in liberal circles about the “enormous”
give-away to “the rich” in the Bush tax cut. In fact, the top income tax rate
of 39.6 percent comes down in only slow and tiny steps, leaving the bulk of
the tax hikes enacted since 1986 firmly in place. Through 2004, the top rate
declines by only 1 percentage point, to 38.6 percent. By 2006, the top rate
will have fallen to 35 percent, still 7 percentage points higher than the top
rate of 28 percent that was in place before it was jacked up 5 percentage
points by the first George Bush and another 7 points by Bill Clinton.
If anything, coming at a time of unprecedented consumer debt, overblown
government, a slow economy and a weak market, the tax cut is too small to
arrest the trend toward statism and too stretched out into future years to
sufficiently jolt the economy back to health.