As federal deficits mount to record levels, President Bush now tells us there's light at the end of the tunnel. Not a bright light, mind you, but he does claim that his new budget plan, despite more huge tax cuts, will get the government's books halfway to balanced within five years. There are, however, a few major ifs: If you don't count spending for Iraq and Afghanistan. If you ignore the promised but unbudgeted fix for the alternative minimum tax (hugely expensive). If you expect Congress to slash domestic appropriations by about a quarter in real terms. And, apparently, if you assume that by 2009 we'll still be in Bush's "trifecta" (crappy economy, national emergency, war), so he's entitled to keep spending all the Social Security surplus.
David Cay Johnston of The New York Times came to the Urban Institute, a Washington think tank, in January to talk about his intriguing new book, Perfectly Legal. In it, he argues that some of America's richest people -- with the active encouragement of many of our political leaders -- have successfully schemed to avoid much or most of the taxes they're supposed to pay. The event attracted a large audience, not least because Johnston's debating partner was supposed to be Washington's leading tax-shelter lobbyist, Kenneth Kies.
In November, with much fanfare, Gov. Mark Warner (D-Va.) introduced his "comprehensive tax reform plan." He bragged that it will bring "tax fairness for working families" and "put Virginia back on the path to fiscal integrity." Warner's cheerleaders on The Washington Post editorial page have similarly touted the proposal as the solution to "the single most important issue facing the Commonwealth: how to overhaul the state's decrepit tax system to make burdens fairer while generating sufficient revenue to stabilize Virginia's shaky finances." Unfortunately, the rhetoric doesn't match the substance.
We live in scary times. War and terrorism certainly top the list, but President Bush's tax and budget policies are pretty frightening, too. Yet apparently not everyone is as worried as I am. To illustrate, in early November the Republican majority on Congress' Joint Economic Committee called a hearing to lay the groundwork for making our tax system even worse.
Under the rubric of "fundamental tax reform," witnesses were invited to explain why corporations and rich people deserve even bigger tax cuts. Committee Democrats asked me to represent their side. I was what one wag called the "token sacrificial lamb."
If you thought President Bush was done with tax cutting for the rest of his term -- as Bush's budget director promised in June -- you've got another think coming. Pending in Congress this fall, with Bush's avid backing, is still another round of huge tax cuts. This time our lawmakers are planning their third major corporate tax reduction in the past two years.
In light of the government's dire budget straits, more tax cuts might seem pretty reckless. After all, in the just completed fiscal year, combined federal personal and corporate income taxes fell to only 8.4 percent of the economy, their lowest level since before World War II and a third lower than in fiscal year 2000 -- with no relief in sight.