- The Washington Times - Wednesday, March 7, 2001

Providing what Treasury Secretary Paul O'Neill aptly called "a positive start," the House Ways and Means Committee expeditiously passed a 10-year, nearly $1 trillion, across-the-board income-tax-rate reduction last week, setting the stage for the full House to consider the centerpiece of President George W. Bush's tax relief package as early as tomorrow. In a 23-15 party-line vote, the committee endorsed Mr. Bush's campaign commitment to gradually replace the five current income tax rates, which range from 15 percent to 39.6 percent, with four rates ranging from 10 percent to 33 percent.

Most rate reductions would begin to be phased in on Oct. 1, and they would be completely phased in by 2006. By then the current top rates of 36 percent and 39.6 percent would become 33 percent, which, it's worth recalling, is still 5 percentage points higher than the top rate established by the bipartisan 1986 tax-reform legislation. The current 28 percent and 31 percent rates would decline to 25 percent. The 15 percent rate would remain in place, but a new 10 percent rate would apply to the first $6,000 in taxable income for individuals and the first $12,000 for married couples. The committee also voted to establish an interim rate of 12 percent retroactive to Jan. 1 of this year. This action would provide an additional $180 and $360 of tax relief in 2001 for individuals and married couples, respectively.

Ways and Means Chairman Bill Thomas made clear that the rate-reduction plan passed last Thursday was only the first installment of tax relief his committee would pass this year. Mr. Thomas said his committee would send to the floor later this year a second bill totaling roughly $600 billion. That legislation, which would fulfill the balance of Mr. Bush's tax cut promises, would gradually eliminate the death tax, alleviate the marriage penalty and double the child tax credit from $500 per child to $1,000 per child.

When fully phased-in, Mr. Bush's plan would eliminate 6 million additional families from the income-tax rolls. It would also chop off nearly $2,000 from a $3,450 annual income-tax obligation for a family with two children and an income of $55,000, providing a 56 percent cut in income taxes.

In the face of cumulative 10-year projected budget surpluses of $5.6 trillion, committee Democrats offered their party's version of tax relief, which would shave a measly $625 billion from the skyrocketing overpayments from working Americans into federal coffers over the next decade. By merely adding a new 12 percent rate applicable to the first $20,000 of taxable income, the Democratic plan effectively embraced today's confiscatory, anti-growth top rates. Moreover, masquerading a welfare-like, income-transfer scheme as if it were a bona fide tax cut, the plan also sought to increase the Earned Income Tax Credit, which has been widely abused in recent years by fraudulent efforts to claim it. The committee rejected the Democrats' plan.

If anything, the first tax-relief installment that the committee has sent to the House floor for debate this week is too timid. Democrats accurately characterized the estimated $5.6 billion in relief that will be provided during the first nine months of 2001 as relatively minuscule about 5/100ths of 1 percent of the nation's economy. Surely, with the Congressional Budget Office having estimated the 2001 non-Social Security budget surplus to be $125 billion, there's room during the current fiscal year for more tax relief than a puny $5.6 billion especially given the fact that the economy has slowed as much as it clearly has.


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