- The Washington Times - Thursday, May 22, 2003

The front page of The Washington Post declared that the 10-year, $350 billion stimulus package engineered by President Bush represented “a significant retreat” for the president. But President Clinton’s chief economic adviser and the senior Democratic tax writer in the House see things quite differently.

“I think this is an enormous political victory for President Bush,” Gene Sperling, who served as the director of the National Economic Council in the Clinton White House, told CNN viewers Sunday, as the likely compromise between the House and Senate tax-relief bills began to take shape. “He’s gotten virtually everything he wants,” Mr. Sperling added.

Recalling that President Bush last month had dismissed the $350 billion package evolving in the Senate as a “little bitty” tax cut, The Post’s front page seemed to take delight in the fact that the final compromise matched that figure, falling well below the $726 billion plan the president initially offered in January. However, acknowledging that the bill’s numerous tax cuts that are scheduled to expire (so-called sunset provisions) were far more likely to be extended, New York Democrat Charlie Rangel, ranking member of the House Ways and Means Committee, offered a much different perspective. “In the long run,” Mr. Rangel told the New York Times, the bill “will really cost a trillion dollars or more.”

With Mr. Bush laying down the law, Republican congressional negotiators quickly came to agreement this week. That means that withholding schedules reflecting the new, reduced tax rates, which will be retroactive to Jan. 1, will likely be changed by July 1. Workers will see their take-home pay rise accordingly. Relief from the odious marriage penalty will also be on the way. Moreover, by the end of the summer, families will receive rebate checks representing the $400 per-child increase in the child tax credit, which rises to $1,000 this year.

To be sure, the final version of the tax bill, which will almost certainly be presented to the president before Memorial Day, does not completely eliminate the double taxation of dividends, as Mr. Bush sought. But it goes a very long way. The bill slices the top personal tax rate on dividends by more than 60 percent, reducing it to 15 percent from the current 38.6 percent (which itself is nearly half the 70 percent tax rate that applied to so-called “unearned income” before the 1981 Reagan tax cut). In addition, in a bonus the White House did not even seek, the top capital gains rate, which was 35 percent a quarter-century ago, was chopped by another 25 percent, falling from the current 20 percent to 15 percent.

Yes, many of these tax breaks are subject to sunset provisions. Apart from several Democratic presidential candidates appealing to the most extreme segments of the Democratic Party, however, how many congressional Democrats will lead the charge to prevent the extension of the accelerated increase in the child tax credit, which benefits more than 25 million low- and middle-income families, when it expires after 2004? Which Democrats will want to reinstate the marriage penalty, which currently costs tens of millions of families an average of about $1,500 each year?

While there can be no doubt that the tax-relief bill includes necessary measures to address current economic weakness and offers long-term growth enhancements, it must be noted that additional stimulus measures may well be needed in the future. But make no mistake: This is a major victory for President Bush.


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