THE TAX BILL being finalized by the House and Senate is such a weak and feeble thing that it would hardly seem worth President Clinton's while to savage it. What Republicans are touting as "the largest tax cut since 1981" will be worth — using their numbers — a maximum of $85 billion over the next five years. Over the same five years, the federal government expects to collect $8.5 trillion in revenue. Which means that "the largest tax cut since 1981" will reduce Americans' tax burden by a grand total of one penny on the dollar.
And that's putting it optimistically. Congress isn't really going to produce any net tax relief. Under the budget deal the GOP and the president signed in May, federal tax collections are to rise from $1.5 trillion this year to $1.9 trillion in 2002. Federal spending, meanwhile, is to climb from $1.6 trillion to $1.9 trillion. So much for curbing the federal behemoth. Just 2½ years after vowing to cut spending and roll back taxes, the Republicans have toppled their Contract with America. In its place they have erected a Contract with Clinton: Now they promise to raise spending — and to pay for it by raising taxes even more.
Against this background of scorching tax revenues, the spritz of relief being proposed by the Republicans is barely worth mentioning. A $500-per-child tax credit. A lower tax rate on capital gains. Indexing to shield taxpayers from inflation. Slightly less onerous death taxes. Relaxed eligibility for Individual Retirement Accounts.
As tax cuts go, these are modest to a fault. There is nothing here to compare, for example, with Ronald Reagan's sweeping reduction in tax rates in the 1980s, which uncorked the most vigorous economic boom in US history. The Gingrich-Lott tax cuts would merely uncork a bit of breathing space for less-than-affluent taxpayers. Of the niggardly $17 billion a year they are seeking in decreased taxes, more than three-fourths would go to taxpayers earning less than $75,000.
Such minuscule tax relief would not change the proportion of taxes paid by different income groups. The rich would keep getting soaked. The top 20 percent of earners would go on paying 64 percent of all federal income taxes. The bottom 20 percent would continue to pay less than 1 percent.
But for the Clinton administration, any tax cuts are tax cuts "for the rich." Almost every major element of the GOP tax plan has come under White House attack. Once again, Republicans are getting pounded with the Democrats' class-warfare club:
* Treasury Secretary Robert Rubin intones that the proposed tax cuts fail "the test of having a bill that in some way balances the benefits for middle-income and working Americans."
* Richard Gephardt, the House minority leader, thunders that Republicans "have been after tax cuts for the wealthy now for 15 years" because "that's what they think their mission in life is."
* The AFL-CIO buys radio spots blasting "Newt Gingrich and the leaders of Congress" for trying "to give deeper tax breaks to wealthy investors and people who inherit million-dollar estates."
* Time magazine's Margaret Carlson — some partisans masquerade as reporters — wails: "The working class are going to be eating bologna as a result of this tax bill because 40 percent of the children aren't going to get anything."
It's all shameless demagoguery, of course. And the White House has concocted a shameless accounting trick to back it up. In analyzing who stands to benefit from the GOP tax cuts, the Clinton administration has not been classifying taxpayers by their earnings. It cites their "Family Economic Income" instead.
And what is Family Economic Income? Well, says the Treasury Department, it is a taxpayer's adjusted gross income, plus some add-ons. What sort of add-ons? "Unreported and under-reported income; IRA and Keogh deductions; nontaxable transfer payments such as Social Security and AFDC; employer-provided fringe benefits; inside build-up pensions and and life insurance; tax-exempt interest; and imputed rent on owner housing."
In other words, the administration is arbitrarily inflating people's incomes by counting pensions they haven't received, insurance policies they haven't collected, and "imputed rent" they haven't seen. Never heard of "imputed rent?" That's the rent you could get for your house — if you weren't living in it.
Marvelous. To prove that the Republican tax cuts will mostly benefit the wealthy, Treasury simply adds tens of thousands of dollars to middle-class taxpayers' incomes. Voila! — they're wealthy. According to the Census Bureau, 13.8 million families earn between $50,000 and $70,000. But with the Clinton administration's New Math, the number jumps to 17.3 million. Amazing how statistics can change once you remember all those people paying themselves rent.
Ironically, Republicans had bent over backward to come up with tax cuts that couldn't be attacked on "fairness" grounds. Now they're being attacked on those grounds anyway, and they're furious at the Democrats' sleazy move. Like Charlie Brown, they're always surprised and angry when Lucy snatches away the football. When will they learn? If you keep playing football by Lucy's rules, you'll keep winding up on your back.
(Jeff Jacoby is a columnist for The Boston Globe).
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