- The Washington Times - Monday, May 19, 2003

In a Congress whose two bodies are each controlled by the Republican Party, which occupies the other end of Pennsylvania Avenue as well, the time for compromises on badly needed tax relief has arrived.

Late last week, the Senate narrowly passed a net tax decrease of $350 billion through 2013. The House version, which passed the week before, would cut taxes by $550 billion over the same 11-year period, including what remains of fiscal 2003, which ends Sept. 30.

Despite its lower advertised total of $350 billion in tax relief, the Senate bill has been embraced by the White House. Like everybody else in town, the Bush administration strongly believes that Congress will not permit many of the Senate’s tax cuts to expire in accordance with the bill’s numerous sunset provisions. For example, it is unlikely that the double taxation of dividends, which the Senate bill reduces by 50 percent in 2003 and completely repeals from 2004 through 2006, will re-emerge in full force in 2007, as the legislation assumes. Nor would Congress likely increase the marriage penalty in 2005, after significantly reducing it for the 2003-04 period. The same rationale applies to sunset provisions in the House bill, which increases the child tax credit from $600 to $1,000 (2003-05) only to revert to the earlier, less generous phase-in schedule afterward. (The Senate bill raises the child tax credit to $1,000 and keeps it there for the duration.)

The current condition of the economy makes timely compromises essential. Surely, over a period (2003-13) when the Congressional Budget Office estimates cumulative tax revenues will total $29.8 trillion, Republican lawmakers can reconcile their differences between $350 billion and $550 billion. Unless some form of legislation is enacted soon, however, the income-tax withholding schedules cannot be changed by July 1 to reflect the lower tax rates that both versions embrace. Moreover, the sooner legislation is passed, the sooner families can receive consumption-boosting rebate checks for the child tax credit, should Congress decide to pursue this option.

We understand the arguments between adherents of a purely incentive-based tax cut (marginal-rate reductions) and those who place great importance on tax-influenced social policy (child tax credits). But in a complex, interconnected world where neither faction can predict how its tax-relief proposals will precisely affect the economy, there should be more than enough incentives to pursue the one policy — the reduction of the federal income-tax burden — that both groups rightly believe will provide a boost to the lagging economy. In the final analysis, it is the duty of Congress to legislate much-needed tax relief, and very soon.

To appreciate the softness of today’s economy, policy-makers only need to take note that the Conference Board announced yesterday that its index of coincident economic indicators, which measures current economic activity, declined once again in April. Meanwhile, the organization’s index of leading economic indicators, which forecasts the direction of the economy, registered a not-too-simmering increase of 0.1 percent in April. That follows declines of 0.2 percent in March and 0.5 percent in February. The time to address the weakened U.S. economy is wasting away.

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