- The Washington Times - Monday, January 21, 2002

President Bush and his advisers could not have been happier when Ted Kennedy, the leader of the Democratic Party's dominant liberal wing, called for repealing some of the Bush tax cuts.

The Massachusetts senator, arch-symbol of unrestrained, overweight government, who never met a tax cut he liked, at least not since President Kennedy's cut taxes in the 1960s, has sharpened the political battle lines in this year's tax wars.

Mr. Kennedy wants to kill the Bush tax cuts for people in the top three tax brackets, as well as the estate tax cut for family businesses, so he can squeeze $350 billion more out of the economy to spend on the government. Mr. Bush wants to keep the tax cuts on track, and even accelerate them, to stimulate investment, work, business expansion and new job creation to lift the country out of its recession.

With his soak-the-rich speech, Mr. Kennedy has given the Republicans a bigger political target in the midterm elections and a clearer choice for voters: The class warfare, anti-tax cut Democrats who want to grow the government vs. Bush Republicans who want to grow the economy.

Polls show that when voters are presented with these two sharply contrasted choices, they choose tax cuts. A Gallup Poll this month found that 67 percent of Americans want the Bush tax cuts "delivered in full and on schedule to help revive the nation's economy."

Other Democrats like Senate Majority Leader Tom Daschle, who says the tax cuts are destroying the economy, but who refuses to call for their repeal, cannot summon the nerve to follow his own convoluted logic to its obvious conclusion. Mr. Kennedy, one Democrat said, was "showing the courage of Daschle's convictions."

Thus, Democrats are hopelessly divided into three groups over what will be the central issue in this year's elections: "The Senate Democrats who want to raise taxes; the 12 Senate Democrats who voted for the tax relief; and the Democrats who want to attack tax cuts yet refuse to call for their repeal," White House communications strategist Jim Wilkinson said last week.

Mr. Kennedy's position in the tax cut debate on the side of higher tax rates for people in the upper income brackets shows that he has learned nothing from his brother's tax cuts. He sees the Bush tax cuts as a zero sum policy, robbing the government of revenue that he wants to spend on more and bigger federal programs.

Just about every economist, including those in JFK's administration, said his tax cuts would result in deeper deficits. President Kennedy, saying "a rising tide lifts all boats," believed the opposite, that they would make the economy stronger, which would result in more revenues, not less. The result was faster economic growth and sharply higher tax revenues that led to a balanced budget by 1969.

By repealing the tax cuts for those in the 31 percent, 36 percent and 39.6 percent tax brackets, Teddy would be killing the goose that lays the golden egg. The reason: Most of the government's income tax revenue comes from people in these top brackets.

Who says? The Internal Revenue Service. New IRS tax data obtained by the Joint Economic Committee shows that the top 1 percent of tax filers paid 36.18 percent of all the personal income taxes the Treasury received in 1999, the latest year for which such numbers are available.

This share represents a substantial increase from the 34.75 percent level posted in the previous year.

According to the new IRS figures, the top 5 percent of tax filers paid 55 percent of all income taxes; the top 10 percent paid 66 percent; the top 25 percent paid 84 percent; and the top half paid 96 percent. The bottom half paid a mere 4 percent.

Contrary to the persistent charges that the wealthy are not paying their full share, the IRS figures show they are paying the lion's share of taxes. These are also the people who typically invest more and launch start-up businesses, investments that are crucial to a thriving, full employment economy.

Raise taxes on these upper-income groups and they will work, invest and save less and that will result in less tax revenue. Cut their tax rates and all others, as the Bush tax cuts will do, and you not only boost growth, that growth will yield more revenue for the government to pay its bills and reduce its debt.

Meantime, the number crunchers in the Office of Management and Budget say the dirty little secret in Mr. Kennedy's tax plan is that he cannot get his $350 billion in savings by just taxing the top brackets more.

"To get the numbers he's talking about, he's going to have to reach down to the people earning less than $40,000 a year," Budget Director Mitch Daniels told me. No wonder Republicans were grinning after Ted Kennedy made his proposal last week.

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