- The Washington Times - Saturday, September 4, 2004

The economic recovery from the latest recession has had its disappointing moments, such as when the economic expansion has hit the occasional “soft patch.” With that in mind, however, consider the burgeoning corporate scandals (whose origins, like the stock market’s collapse, are traceable to the late 1990s) and the September 11 terrorist attacks. Now, imagine how the U.S. economy would have evolved in the absence of the Bush tax cuts. Even more alarmingly, imagine how the world economy would have been affected if the U.S. locomotive had not been refueled with such timely tax relief. To consider such potentially cataclysmic scenarios with the knowledge that they never developed is to appreciate the wisdom that the Bush White House displayed in aggressively enacting the indispensable tax cuts.

It is now indisputable that Vice President-elect Cheney was right when he speculated in December 2000 that the economy probably had already entered rough terrain. In fact, revised data reveal that the economy actually contracted during the third quarter of 2000, foreshadowing the recession that officially began less than two months after Mr. Bush entered office. Inarguably, with $600 rebate checks for married couples and $300 checks for singles in the mail by the early summer of 2001, the tax cut signed by Mr. Bush in June 2001 has to be considered among the most well-timed, countercyclical tax-relief measures in history.

To counter the stock market’s continuing doldrums and to reinvigorate business investment, which was in the process of declining for nine quarters in a row following the 2000 telecom collapse, Mr. Bush successfully pursued a stimulus package in 2002. And in early 2003, he instigated an acceleration of the 2001 tax cuts and achieved major relief from the double taxation of corporate profits by reducing the maximum tax on dividends from nearly 40 percent to 15 percent, while lowering the top rate for long-term capital gains from 20 percent to 15 percent. As a result, beginning with the second quarter of 2003, business investment has now increased by double-digit rates during four of the past five quarters, and major stock indexes (the Dow, the S&P; 500 and the tech-heavy Nasdaq), despite recent retreats, have still increased about 20 percent since Mr. Cheney broke a 50-50 tie in the May 23, 2003, Senate vote on the president’s 2003 tax cut.

Altogether, beyond dividends and capital gains, the income-tax cuts enacted under the Bush-Cheney administration have: 1) lowered the top tax rate from 39.6 percent to 35 percent, which is still 7 percentage points above the top rate in effect after passage of tax reform in 1986; 2) reduced the middle-class brackets by 3 percentage points; 3) introduced a new 10 percent bracket, which saves married couples $700 and singles $350; 4) doubled the child tax credit from $500 to $1,000; and 5) effectively eliminated the marriage penalty, which forced tens of millions of married couples to pay an average of $1,500 in higher taxes than they would pay if they co-habitated. Meanwhile, the distribution of the federal tax burden, which was heavily progressive before Mr. Bush entered office, has remained virtually unchanged.

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