The Taxonomist

Just before George W. Bush's inauguration, the Clinton administration put out its final projections of budget surpluses over the next decade. According to a news story in The Washington Post, the analysis predicts about $1.6 trillion in surpluses, assuming that Social Security and Medicare surpluses are off limits and that a collection of tax breaks and programs technically due to expire are extended as they have been in the past. The Post warned, "That would not leave enough to cover Bush's tax cut, which with interest costs could drain revenue by more than $1.9 trillion, let alone his other spending plans."


Actually, the latest budget news is even worse for Bush than the Post reported. If discretionary spending keeps up with population growth, says the Clinton analysis, projected surpluses drop to $1.2 trillion. Alternatively, if appropriations keep up with the economy, then the surpluses over the next 10 years fall to less than $0.5 trillion. Add in some of the new spending initiatives that enjoy bipartisan support--funds for prescription drugs, education, defense, and the like--and there's hardly any surplus left beyond Social Security and Medicare.


Not surprisingly, Bush spokesman Ari Fleischer, who used to spin ferociously for former House Ways and Means Committee Chairman Bill Archer of Texas, told reporters that the Bush administration "will not be using these estimates." Or as Ronald Reagan once put it: "Facts are stupid things."


Stupid Car Tax


When Virginia Governor Jim Gilmore, who now also chairs the Republican National Committee, campaigned in 1997, his top cause was repeal of the state's local car tax. Critics said Gilmore's plan would blow a big hole in the state budget, since the candidate also promised that the state would reimburse local governments for lost revenue. Once in office, Gilmore was able to make do in the early years of the phased-in repeal because of a huge surge in state income-tax revenues in 1999 and early 2000, largely thanks to taxes paid by Virginians in the high-tech industry who exercised stock options in 1999.


But as with the Nasdaq, the bloom is off the revenue rose in Virginia. In the second half of 2000, total general revenues in the state were actually lower than in 1999. With car-tax repeal predicted to eat up more than a tenth of total general revenues by next year, Virginia lawmakers in both parties are growing nervous about its impact on important state programs. They'd prefer to freeze the phase-out at last year's 47.5 percent, stopping the 70 percent phase-out scheduled for 2001 and the full repeal scheduled for 2002.


Despite the state's dire fiscal straits, Gilmore is happily pressing to keep his "no car tax" promise. His latest budget plan offers a combination of bright revenue projections plus what he calls "a sound, solid, conservative and brilliant approach to the situation." He wants the state to borrow the money to pay for this year's installment of the car-tax cut! Specifically, Gilmore would pledge the next 20 years of the state's tobacco settlement funds--some $460 million--to help pay for one year's worth of car-tax relief.


Gilmore's term ends this year, and he seems to be taking a "what the hell do I care?" approach. But Virginia legislators who worry about the state's future have other thoughts. "It's perfectly awful," said John H. Chichester, the Republican chairman of the Virginia senate's finance committee, which voted 15 to 1 in January to stop the car-tax phase-out. It will be a hard fight to turn that committee vote into law--Gilmore promises to veto any such bill--but there's a lot riding on it. As Chichester points out, "If the car tax goes forward, then money is being cut from other services to pay for it."


Ask a Stupid Question and You'll Get a Stupid Analysis


Here's how The Washington Post analyzed the results of a recent poll: "At particular risk: Bush's plan for a large tax cut for all Americans, which is opposed by most congressional Democrats and by 51 percent of those interviewed in the Washington Post-ABC News poll."


Well, actually, 51 percent preferred "a smaller tax-cut plan that provides targeted tax cuts mainly for lower- and middle-income people" and 47 percent liked "a large tax-cut plan that provides an across-the-board tax cut for everyone." Given the poll's margin of error of plus-or-minus 3 percent, that looks like a surprising tie to me. (I'd rationalize it as reflecting a lingering annoyance with Al Gore.)


Then again, the question was arguably pretty stupid. How about "neither" as an option? Asked to rank 18 issues in terms of importance, the same poll respondents put "cutting taxes" 12th--less important than the economy, education, health care, Social Security, and balancing the budget. Only campaign finance reform, curbing political partisanship, and banning late-term abortions generated significantly less enthusiasm than tax cuts did.

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