- The Washington Times - Monday, February 26, 2001

Having reaffirmed his campaign promise to cut taxes and boost education spending, President Bush will unveil the blueprint for those and other priorities in his fiscal 2002 budget plan to the American public at 9 tomorrow night. On Wednesday, Mr. Bush will deliver that budget proposal, his first, to Congress, where Senate Minority Leader Tom Daschle and House Minority Leader Dick Gephardt recently shattered any hope that the tax-relief debate could proceed without the Democratic Party relying upon its timeworn class-warfare strategy.

Consider how Messrs. Daschle and Gephardt responded to a central premise of President Bush's 10-year, $1.6 trillion tax-cut proposal. In describing his plan, Mr. Bush quite factually states, "We will return $1,600 to the typical American family with two children. Working families earning between $35,000 and $75,000 will keep anywhere from $600 to $3,000 more" once the plan is fully operational. That is a compelling argument; and, unlike the rebuttal of Messrs. Daschle and Gephardt, it can be made without resorting to mathematical gymnastics.

One acceptable definition of a "typical American family" would be that family whose income is precisely in the middle of the income stream: Half of America's families earn more than this median family, and half earn less. The median family income in 1999 was $48,950. To qualify for the full $1,600 in tax relief, however, Mr. Bush's "typical American family with two children" could earn as little as $36,000. (Any two-child, two-parent family earning less than $36,000 would have its annual income-tax obligation completely eliminated by Mr. Bush's plan.) After consideration of the standard deduction and the personal exemptions, the income-tax bill of the hypothetical family earning $36,000 currently is $1,617, assuming they do not take a mortgage-interest deduction.

The $1,600 tax reduction Mr. Bush cites comes from two sources. This typical family would save $600 by virtue of reducing the tax rate on the first $12,000 of taxable income from the current 15 percent to the proposed 10 percent. The balance of $1,000 in tax savings comes from a doubling of the child tax credit from $500 to $1,000. This family earning an income of $36,000 would see its income taxes plunge by 99 percent. A family earning the median-family income of $48,950 would see its income taxes fall by more than 50 percent.

A two-parent, two-child working family earning $75,000 would have little trouble qualifying for an income-tax reduction of $3,000 under the Bush plan, which would lower their income-tax bill by roughly one-third. In addition to the $1,600 detailed above, this family would also benefit from Mr. Bush's proposals to (1) reduce the 28 percent tax rate, which kicks in at $45,200, to 25 percent; (2) alleviate the marriage penalty, which currently requires tens of millions of married couples to pay about $1,400 per year more in income taxes than if they were cohabiting; and (3) expand the charitable deduction to non-itemizers.

Messrs. Daschle and Gephardt responded to these compelling arguments with the truth-twisting, obfuscating class-warfare rhetoric that has become a staple of the Democratic Party. Staging a press conference in front of the Capitol using a Lexus and a muffler as their props, Mr. Daschle declared, "If you're a millionaire, under the Bush tax cut, you get a $46,000 tax cut, more than enough to pay for this Lexus. But if you're a typical working person, you get $227, and that's enough to buy this muffler." For his part, Mr. Gephardt whined, "The lion's share of [Mr. Bush's] proposal goes to the wealthiest taxpayers."

What Messrs. Daschle and Gephardt failed to acknowledge was that 13 percent of a millionaire's taxable income is currently taxed at 36 percent and more than 70 percent of that income is taxed at 39.6 percent, resulting in an annual income tax obligation approaching $400,000 for individuals earning $1 million. Mr. Bush's plan would reduce the maximum federal income tax rate to 33 percent, which is 2 percentage points higher than the top rate President Clinton inherited in 1993 and 5 percentage points higher than the top rate established by the 1986 bipartisan tax reform legislation.

Messrs. Daschle and Gephardt also failed to acknowledge that the top 1 percent of wage earners currently pay more than 33 percent of income taxes, which is about double their share of income. Meanwhile, the bottom 50 percent of wage earners pay 4.3 percent of total income taxes, a proportion that represents less than a third of their share of income. The $46,000 tax cut Mr. Daschle bemoans represents about 12 percent of income taxes paid. (As for Mr. Daschle's manufactured figure of $227, suffice it to say that it is completely contradicted by Mr. Bush's verifiable assertions confirmed above.) Moreover, utterly contrary to his implication that such a $46,000 refund would be used to purchase a luxury car, overwhelming evidence confirms that the typical millionaire would direct his tax cut into growth-enhancing investments, spurring economic activity and generating employment.

If Messrs. Daschle and Messrs. Gephardt really believe that the government is better positioned than the private sector to make these indispensable long-term investments, then let them say so. And then we all can have a good laugh.

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