So Congress passed the Third Annual Awful Bush Tax Cut. It was a close vote in the Senate, with Vice President Dick Cheney breaking a 50-to-50 tie. But both sides agree on one thing: The cost of the bill over the next decade will be far more than its advertised $350 billion price. A trillion dollars or so is more plausible.
To squeeze a trillion dollars into this year's $350 billion target, Republican leaders specified an array of sunset dates for most of the tax cuts. Items mainly affecting middle-income taxpayers, such as the increase in the child credit to $1,000 and lower tax brackets for married couples, will end after two years. A $60 billion cut in corporate taxes also expires after two years -- to be followed by big corporate tax increases! Likewise, measures to keep tens of millions of taxpayers from falling under the dreaded "alternative minimum tax" have a two-year time limit.
More generous treatment goes to the GOP's favorite items. The cuts in the top tax rates previously scheduled for 2006 move up to 2003 and stay in place through 2010. The drop in the top tax rate on capital gains and dividends to 15 percent runs through 2008 (although even that late sunset was crucial to the pretense that the bill will cost only $350 billion).
Even before the bill passed, its backers were boldly promising that the sunsets were merely a charade to get around the budget rules. But that transparent hoax was enough to gather the deciding vote from Sen. George Voinovich (R-Ohio), who had earlier pledged to oppose any tax cut totaling more than $350 billion over 10 years because it would be fiscally irresponsible. As the final vote neared, Voinovich praised GOP leaders for letting him pretend not to prostitute his supposed principles. "I appreciate the fact that they've been trying to honor my concerns and make me an honest man," he told The Associated Press.
Meanwhile, President George W. Bush is crowing about getting pretty much everything he wanted in terms of upper-income tax cuts, and he's assiduously trying to convince ordinary Americans that there's much more for them in the bill than actually exists. In his speeches, Bush implies that most people stand to gain $1,000 or more a year in tax savings. But he's off by about a factor of 10.
Married couples with children are the only household type whose typical tax cut will (temporarily) approach Bush's $1,000 figure. Their median tax cut will be $958 this year and next, mostly from the short-term boost in the child credit. But couples with children represent only 22 percent of all taxpayers. Couples without kids, a slightly larger group, will typically get $332. The 42 percent of taxpayers who are single without children will get $50. As for single parents, most earn so little that they won't even benefit from the temporary child-credit increase; their typical tax cut will be $5.
Overall, almost half of America's taxpayers will get less than $100 a year in tax cuts this year and next, and three-quarters will get less than $100 in 2005. After that, when only the tax breaks for capital gains and dividends remain in effect, nine out of 10 taxpayers will get less than $100.
Thus, contrary to Bush's falsely advertised $1,000, the typical tax cut from this year's tax bill is actually only $120, and it drops to zero after 2004. The best-off 1 percent, however, will do just fine: Their tax cuts will total almost $100,000 each over the next four years, and continue thereafter.
So what has Bush wrought so far with his first three rounds of tax cutting? Deficits as far as the eye can see. A government too broke to meet its obligations, even to Social Security. And a huge reduction in the wealthiest Americans' tax burden.
Assuming that this year's tax cuts for investors and corporations don't actually expire and the alternative minimum tax is fixed, Bush's tax cuts are scheduled by 2010 to slash by a fourth the taxes that pay for the vast bulk of general government programs. Add in the staggering increase in interest payments that the tax cuts entail and Bush's program will reduce the money available to pay for defense, homeland security, education and all other appropriations by a third.