- The Washington Times - Thursday, May 17, 2001

The bulk of President Bushs tax-reduction plan will not begin to be fully felt until the middle of the decade or later.
Although taxes will eventually be lowered for every American, most of the tax-cut rates would not even begin to inch down until 2002, with the exception of an immediate, retroactive $100 billion economic stimulus this summer that will probably be distributed through a lower withholding rate. This tax cut would come from a new, lower 10 percent tax bracket that would result in $300 in tax savings for individual taxpayers and $600 for married couples.
But the rest of the income-tax-rate-reduction plan would be slowly phased in over the next 6 1/2 years, with other major tax-cut provisions — from estate-tax repeal to marriage-penalty relief — implemented even more slowly over 11 years. And some of the plans supporters are now questioning how much they can depend upon tax-cut promises so far into the future when Mr. Bush will probably not be in office any longer.
"The death tax goes down to 45 percent, then to zero in 2010, but Lord knows who the president will be in 2010," said Stephen Moore, the veteran tax-cut crusader who heads the Club for Growth.
The longer time span — a year longer than Mr. Bush proposed for the income-tax-rate cuts — is due to many factors. The budget resolution adopted by Congress cut the amount of money that could be used for tax reduction, from the $1.6 trillion the president originally wanted to $1.35 trillion. That forced the Senate Finance Committee to stretch out the time line to fit all of the tax cuts that panel members wanted to put into the bill.
Another factor is that the tax-cut totals are based on the slow but steady buildup of an estimated $5.6 trillion in tax revenue surpluses over the coming decade.
"The surplus is phased in as well," said Jill Kozney, chief spokeswoman for Sen. Charles E. Grassley of Iowa who chairs the tax-writing panel. But she added that "There would be an opportunity for additional tax reduction if the surplus projections grow" beyond current projections.
Republican leaders yesterday repeated their desire to accelerate the tax cuts and to bring the tax rates down faster. They hoped to accomplish that when the bill goes into a House and Senate conference to iron out differences over the legislation, which is headed toward Senate approval next week.
"I dont think the rates in this bill are phased in fast enough," Senate Majority Leader Trent Lott of Mississippi said, hinting that some parts of the bill, like the popular marriage penalty repeal, might be put off until later to make room for faster and deeper income-tax-rate cuts.
"Clearly, what passed the Finance Committee is not likely to be the final product. But the core components are there. But you cant do it all in the first bill. You have to look at how much of these pieces you can do and by how much. Its going to change as we go forward, Im sure," he said.
Still, despite Mr. Bushs repeated promises of giving back some of the budget surpluses to the people who earned them in the first place, an examination of the pending Senate bill showed that returning that money is going to take much longer than perhaps most people realize. Among the chief tax-cut provisions:
* The top personal income-tax rate would be reduced from 39.6 percent to 36 percent, 3 percent above the 33 percent rate that Mr. Bush proposed. But these taxpayers, along with all other taxpayers in the lower tax brackets, would have to wait until 2007 to see the new tax rates fully implemented.
For example, the top income-tax rate would decline to 38.6 percent next year, a reduction of only one percentage point, a cut that critics of the bills backloaded tilt say would result in a minuscule stimulus to the economy. The tax rate would drop to 37.6 percent in 2005 and then to 36 percent two years later.
* Reduction of the marriage penalty, which imposes higher tax levels on working married couples who file a joint tax return, would not begin to take effect until 2006 and would not be fully phased in until 2011.
Part of it would take effect next year for those in the bottom 15 percent tax bracket through the Earned Income Tax Credit for lower-income couples.
* The estate-tax repeal would gradually raise the estate-tax exemption beginning in 2002, but it would not be effectively repealed until 2010.
* The plan would eventually double the $500-per-child tax credit on taxes owed in $100 increments, but it would not be fully phased in until 2011.
* The maximum annual contributions that taxpayers would be allowed to put into tax-free individual retirement accounts would be raised from the current $2,000 limit to $5,000.
The yearly limit would rise to $2,500 in 2002, $3,000 in 2006, $3,500 in 2008, $4,000 in 2010, and $5,000 in 2011.
* Dave Boyer contributed to this report.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide