Opinion pieces and speeches by EPI staff and associates.
THIS PIECE ORIGINALLY APPEARED IN THE HOUSTON CHRONICLE ON OCTOBER 29, 2000.
Bush’s numbers are way out of balance
by Max Sawicky
If you’ve been watching the Gore/Bush debates, you might feel like a spectator at a slow-moving tennis match. I would prefer a WWF smackdown, but with a real clash of policy proposals. Here’s how the candidates’ tax and budget plans collide.
Governor Bush defends his tax cut package against charges that it is stacked in favor of the rich by saying they pay a high share of taxes, so they must get a high share of any tax cut. He also implies that low-income people pay little or no income tax, so tax cuts for them are not feasible.
Vice President Gore responds that tax cuts for the wealthy are not a big priority. More important is paying down the public debt, or spending more on smaller class sizes, prescription drug benefits, etc. He’s right – the economy seems to be running fine without such cuts, and upper-income persons have enjoyed bigger income gains than everyone else.
It is not true that low-income people pay no taxes, and it is possible to reduce their taxes. A family of four with two children making as little as $35K could owe $1,520 in income tax and $5,355 in payroll tax. Their taxes could be reduced by an expansion of the Earned Income Tax Credit, or by allowing part of the payroll tax as a refundable credit against income tax liability.
Such talk worries those who believe the projected budget surpluses are “not real.” But for Fiscal Year 1999, the surplus was $124 billion. For FY2000, it was $232 billion. For the current fiscal year, it is projected to reach $260 billion. I have to wonder, how big does this number have to get before people will concede its reality?
Governor Bush says surpluses are “the peoples’ money,” but this creates a dilemma in light of the peoples’ debt. Bush promises to pay down debt, to rebuild the military, to give prescription drug benefits to seniors, to finance individual investment accounts, and to provide very large tax cuts. This is reminiscent of my favorite move, “The Producers,” in which Zero Mostel goes to jail for selling investors 1000 percent of the profits from his play.
In regard to Social Security, Gore points out correctly that Bush is promising the same trillion dollars of payroll tax to two different groups of folks – young workers and retirees. Bush says that the Social Security surplus would finance new private accounts for young people. The problem is that those surplus revenues will be needed to pay benefits within 15 years, well before the young are ready to retire.
Bush’s main charge against Gore’s tax cut package is that it is selective because it consists of tax credits that are targeted for specific purposes, such as saving and higher education. But the Governor has selective tax credits of his own. More important, the bulk of his tax relief is selectively concentrated on the richest one percent of taxpayers. By contrast, the largest item in Gore’s tax program — savings incentives — is focused on the other 99 percent.
In short, Bush’s numbers are way out of balance. His plan cannot be implemented. Big pieces of it would have to be dropped. And its priorities are highly problematic. Gore is the compassionate conservative in this race.
[ POSTED TO VIEWPOINTS ON DECEMBER 14, 2000 ]
Max Sawicky is an economist with EPI. He specializes in U.S. budget policy and tax issues.