Is George W. Bush hoping to take us back to the 19th century on tax policy?
Prior to the 20th century, except under Abraham Lincoln, the federal government relied almost entirely on regressive consumption taxes to pay its bills. This system of high taxes on the poor and middle class and hardly any tax burden on the rich and powerful reached its apotheosis under Republican President William McKinley, who worked with GOP political boss (and Karl Rove hero) Mark Hanna to raise consumption taxes to almost 50 percent on many ordinary commodities in the 1897 tariff bill.
There are some subjects I just can't stop harping on. But there's a rationale for my repetition. I hope that someday the mere mention of "Cato Institute" or "Heritage Foundation" or "Bush" will make people immediately think, "Yeah, those are the guys who support tax cheating." Here's the latest entry in the dossier.
In the waning days of the Clinton administration, the Internal Revenue Administration proposed to require U.S. banks to report the interest they pay to foreign depositors. Foreigners are exempt from U.S. federal taxes but not from taxes where they live. The goal was to curb tax cheating, both by foreigners in their home countries and by Americans pretending to be foreigners in order to evade U.S. taxes.
Everybody's annoyed at big American corporations that renounce their citizenship and move to Bermuda to avoid taxes. The public heat has forced even most Republican politicians to feign outrage. In recent months, PricewaterhouseCoopers Consulting abandoned its plan to incorporate in Bermuda, as did the Stanley Works, the poster child for unpatriotic corporate behavior. Who could defend this disreputable practice? Well, it turns out that quite a few people are weird enough, or have been paid enough, to have done so.
All across the country, newspapers big and small have reported the shocking news that the $5.6 trillion in 10-year budget surpluses projected in early 2001 has almost disappeared. Instead, as an Associated Press story typically put it, "Last month, government analysts at the Congressional Budget Office projected [only] a $1 trillion federal budget surplus for the fiscal years 2003 to 2012." No doubt this is the conventional wisdom, but it's not true. The budget forecast was never as rosy as the press reported last year, and the current outlook is far grimmer than the papers are telling us now.
Mark Weinberger didn't serve long as George W. Bush's assistant treasury secretary for tax policy, but until he retired last April, he was a man with a mission. Before and since -- and apparently during -- his brief stint at the U.S. Department of the Treasury, Weinberger worked at Ernst & Young, the outspokenly unpatriotic accounting giant [See Robert S. McIntyre, "Putting Profits over Patriotism," TAP, March 25, 2002.]. He was sent to the Treasury to accomplish one key goal: Undermine a law requiring corporations seeking a tax credit for research and experimentation to engage in, well, actual research and experimentation.