The Tax Cut: A Typical Bush Mess

by Molly Ivins

The Bush tax cut, centerpiece of his presidential campaign and signature issue, is so bad Jane Bryant Quinn, the business columnist who is not normally given to overexcitement, calls it "a contemptible piece of consumer fraud." Time magazine's headline is "Stupid Tax Tricks." And the best the people who voted for it can say is, "Don't worry, we'll take it all back."

This was supposed to be a huge tax break for the rich, a simple albeit awful idea. The biggest break for the rich was to be the repeal of the estate tax: Quinn says of its final form, "Laughter is the right response." The whole bill is loaded with phase-ins, phase-outs and then, poof, suddenly everything disappears. If you are real rich, you need to die before 2011, when things go back to the way they are now. It's like a giant game of snakes and ladders. The rich get theirs in the form of a larger drop in their top rate than anyone else gets.

Congress is getting most of the blame for this mish-mash, but it has the unmistakable Bush hallmark -- loyal legislative minions try to carry out one of Bush's unworkable ideas and in the process create a disaster. The problem with Bush's tax cut, in addition to its basic unfairness, is simply that it was disingenuous and dishonest to begin with. By back-loading a 10-year plan -- i.e., phasing it in so that most of the actual tax relief doesn't appear for years -- Bush was able to hide the true cost of the thing, which is now estimated at $4 trillion when it takes full effect.

That is, frankly, nuts.

The Bush tax cut was supposed to "simplify" the tax code. Follow this bouncing ball: Bush made much of the "marriage penalty," which affects only those couples who earn about the same amount of money. The new tax cut they get is also going to married couples who aren't so penalized, but only if they are already in one of the higher tax brackets. Couples get no relief before 2005, then they get a higher standard deduction phased in through 2009, and then they lose it all in 2010. Got that? The college tuition deduction, for some unfathomable reason, lasts for only four years, disappearing in 2006.

Some of the oddities in the bill appear to have landed there because of an artificial deadline: The Bushies wanted a tax cut before Memorial Day, so the House and Senate conferees had a 48-hour marathon session. The Memorial Day deadline was apparently set because more pessimistic projections about the budget surplus are expected in late June.

A well-known rule of legislating is that strange things always happen when committees work round-the-clock. According to Time, even the richies may turn out to have a problem with this bill because of the alternative minimum tax, or AMT. The AMT, which mostly affects those making over $100,000 a year, is set to be reduced -- but only until 2005, at which point it will expand to 5.6 million people. By 2011, it will affect an estimated 35 million people.

As Robert Reischauer, former director of the Congressional Budget Office, pointed out in a New York Times essay, the only way to pay for these tax cuts is by tapping into the Social Security and Medicare surpluses at exactly the same time the baby boomers start to retire -- hence the prediction that most of these tax cuts will be rescinded, especially those that phase in later.

The Democrats' contribution to this beauty is the rebate, which is 5 percent of the first $6,000 of taxable incomes for single people, or $300 maximum ($600 for couples). The people who really need the money because the baby needs shoes will not be getting a rebate because they don't pay enough in income taxes to qualify. And those who don't need the money desperately are apt to save it, thus cutting down on the likelihood that the windfall will provide economic stimulus.

Both parties can take the blame for the fact that this thing is actually 20 percent more costly than the original tax cut plan, which, if you will recall, was so huge, sensible people like Jim Jeffords refused to vote for it. The Dems were supposed to have cut it by 25 percent, but according to Citizens for Tax Justice, when the bill is finally phased-in it's one-fifth larger than the original proposal.

So it doesn't take a weatherman to see that we're looking at huge deficits and lower services.