Congress still seeking upper-class tax cuts

Posted: Tuesday, February 15, 2000

The following editorial appeared in today's Washington Post:

The congressional session is only three weeks old, and already the ingredients of an election-year budget break-out are in the bowl. The House has passed one tax cut, the Senate another and a third is in conference. During the next 10 years, these three would consume more than half of any general-fund surplus likely to materialize, and there's more to come.

The House bill was passed under the banner of reducing the so-called marriage penalty that the code imposes on many two-earner families; they pay more married than they would if single. But the measure is drawn in such a way that much of the benefit goes to single-earner couples who already receive a marriage bonus, in that their tax is less than if paying singly. The sponsors were undeterred, saying they didn't want to help working moms at the expense of those who stay at home. Next they'll want to cut the tax of singles, lest the code impose a widow's penalty.

The truth is, the bill has nothing to do with marriage - or penalties. It uses the differences in tax treatment of married couples and single payers as the gloss for a generalized tax cut mainly for the better-off; well over half the benefit from the bill would go to the highest-income fourth of all taxpayers.

The Senate bill likewise employs a false label. The stated purpose is to compensate small employers for the cost of the attenuated minimum-wage increase to which it is attached. But most of the benefit would go to upper-income taxpayers who haven't the remotest relationship to the minimum wage.

The tax cuts in conference are a holdover from last year, which the House leadership exacted as the price of a bill, much resisted by business groups and the insurance industry, to tighten regulation on managed care. The tax breaks are supposed to increase access to health care, which sounds as if it might mean providing insurance to those who lack it. But it doesn't; the provisions would mainly benefit those who already have insurance, while making it easier for the healthy and well-off to opt out of the broader insurance pool.

None of the tax cuts is yet law, and the good news is that they face some resistance. Some Republicans - Senate Budget Committee Chairman Pete Domenici and Appropriations Committee Chairman Ted Stevens, for example - have indicated that they will press for relatively realistic estimates of the probable budget surplus. That should help confine the tax-cutting. Senate Democrats also have the votes to block tax cuts, if they will, and the president has threatened to veto more than modest relief. But modest lies in the eye of the beholder, and the president's own budget calls for tax cuts in combination with a Medicare prescription-drug benefit and various other costly steps. Senate Minority Leader Tom Daschle suggested again last week that such a deal might be possible - a smaller marriage-penalty bill in return for a drug benefit.

Why not, you might ask, if so sizable a surplus lies ahead? But the surplus at this stage is only a projection, and the projection is incomplete. It ignores costs that everyone understands the government will face. The largest is the daunting cost of Medicare itself, even without a drug benefit once the baby boomers retire. The risk is that for the sake of another signing ceremony in an election year the parties will agree to spend money the government doesn't have, once more solving their short-term political problems at long-term economic and social expense.



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