May 16, 2003
The Republicans in the Senate, at the behest of George Bush, just passed an irresponsible tax bill in an irresponsible manner.
The manner was to use a transparent gimmick: halving the tax on dividends in 2003 and eliminating it in 2004, 2005, and 2006, but then letting it come back in 2007 when they know, full well, that they will kill it again if they can.
By painting this sunset, they were able to keep the bill in the $350 billion range over the next ten years. But if the dividend repeal turns out to be permanent, the cost would be $660 billion, according to the Center on Budget and Policy Priorities.
Robert Greenstein, the executive director of the center, calls this "Enron-style accounting," adding that the official budget projections are "unreliable and even fraudulent because they are based on assumptions everyone knows to be false, such as that various major tax cuts will simply be allowed to expire."
The idea of getting rid of the tax on dividends in the first place is just an excuse to reward the rich. Half of the benefits of this repeal would accrue to the top 1 percent of the population.
Plus, it's not a good way to stimulate the economy, as even Alan Greenspan has noted.
But you don't need to be head of the Fed to figure this one out.
To get the economy humming along, consumers need to spend more money. But the people who have been postponing major purchases--like getting a new refrigerator, dishwasher, TV, computer, dryer, or car--are not the wealthy. They can afford those items any day of the week. No, the people who have the pent-up demand for these goods are the working poor and the middle class, who've been postponing purchases because they either don't have the money right now or they're worried about losing their jobs.
But the Republican plan would not help the working poor and the middle class very much: It would give 90 percent of the tax benefits to the richest 40 percent of Americans. Everyone else would have to fight over the crumbs.
That is, unless you're a U.S. multinational, in which case you make out like a bandit. The Senate "would offer U.S. multinationals a one-year window to repatriate profits from abroad at a sharply reduced tax rate of 5.25 percent instead of the current 35 percent rate," The Wall Street Journal reported on May 16.
One of the only good things in this bill, except for raising the child tax credit from $600 to $1,000, is to give $20 billion in aid to state and local governments, but even this will be offset by the loss in dividend tax revenue at the state level, as well as by reductions in federal spending for specific state social programs.
All in all, this tax bill is an out-and-out giveaway to wealthy individuals and companies--the heart and soul of the Republican Party.
And it will drive deficits further into the red, which the Republicans will then use as an excuse not to do anything about the crying social needs that face this country.
For Bush and the Republicans, deficits are OK, but only if they help large companies and the rich.