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Bush tax package under fire
President Bush's massive $1.6 trillion tax-cut proposal has been raising a lot of eyebrows. Legislators on both sides of the aisle and business leaders of all stripes are charging that the administration's current plan goes beyond the pale of responsible, across-the-board tax cuts. They are urging President Bush to overhaul his current proposal to ensure that it doesn't blow out the federal budget, threaten Medicare and Social Security, and give short shrift to millions of working families.
More than half of the cuts called for in the Bush plan would go to the wealthiest 5 percent of Americans (see accompanying chart). Citizens for Tax Justice estimates that families earning more than $319,000 a year would enjoy tax cuts of $46,072 while families earning less than $40,000 would receive cuts below $500 a year. "If you make over $300,000 a year, this tax cut means you get to buy a new Lexus. If you make $50,000 a year, you get to buy a muffler on your used car," Senate Democratic Leader Tom Daschle (S.D.) observed.
"The top 1 percent of the population would receive about 40 percent of the tax cuts from the proposal, which is double the share of federal taxes they pay," warns the nonpartisan Center on Budget and Policy Priorities.
Good housekeeping
But fairness is only part of the problem. Also disturbing is the sheer size of the Bush plan--a proposal based on long-range, shaky-at-best projections from the Congressional Budget Office (CBO). Some 70 percent of the surpluses "spent" to fund the Bush tax cut are, in fact, only projections for the years 2007 to 2011. Forecasting that far out can be fraught with peril, warns the Democratic Policy Committee, noting, for example, that CBO acknowledges there is a 50-50 chance that its projections for the year 2006 alone could be off by a whopping $245 billion.
If the rosy surplus forecasts fall just a little short of the mark, the Bush tax plan leaves no margin for error and could trigger massive budget shortfalls requiring the use of Social Security and Medicare surplus taxes. Moreover, it leaves no additional funds to protect these two fundamental entitlements if the CBO forecasts fall substantially short. (The point here is that most analysts project using the non-Social Security and non-Medicare surpluses to help finance these systems as well as to provide a drug benefit.)
The math behind the tax cut also doesn't add up when you factor in other initiatives the administration has called for--including increases in education spending and prescription drug assistance for seniors. Throw in these new efforts, the interest on the national debt, other known costs and the tax cut, and you've overspent the available surplus by $700 billion.
"We do not want to repeat 1981," Daschle said. In that year, "we passed a tax cut on both sides, supported it on both sides, and that led us to a $4 trillion public debt that we're still saddled with today. We don't want to repeat that."
From all quarters
Although the first portion of the Bush tax-cut plan won narrow approval in the House in March, prospects in the Senate seem much less certain. Republican Sens. Lincoln Chafee (R.I.) and Jim Jeffords (Vt.) say the Bush tax proposals are too large, and others such as Sen. Olympia Snowe (Maine) are looking at a trigger mechanism to stop cuts if projections are wrong.
While some Bush backers have tried to dismiss objections to the tax-cut proposal as the politics of "class warfare," some of the very wealthiest Americans also have leveled criticism, particularly when it comes to Bush's call to eliminate the federal estate tax. For example, a major portion of Bush's plan involves repeal of the federal estate tax, the so-called death tax imposed on personal estates in excess of $675,000 (there is no estate tax on property that passes to spouses). Today, only about 2 percent of all estates pay this tax, and that percentage should decrease thanks to existing law that will raise the exemption to $1 million by 2006.
Alarmed by a move that would benefit very few, more than 120 millionaires have signed a petition opposing the estate-tax repeal.
How the education bills differ
Congress is considering several comprehensive education bills that showcase points of contention, as well as areas of agreement, between the Republican and Democratic Parties and the Bush administration.
Among the sticking points are private school vouchers and education block grants. Both are featured prominently in President Bush's plan for revamping the Elementary and Secondary Education Act (ESEA). Bush has proposed using Title I to fund private school vouchers for children attending schools identified as failing. He also has urged the consolidation of most ESEA programs into block grants aimed at giving schools and districts increased budget flexibility in return for submitting a five-year plan for increased student performance. A similar block grant proposal died in Congress two years ago.
In contrast, a House Democratic bill spearheaded by Reps. George Miller (D-Calif.) and Dale Kildee (D-Mich.) shuns voucher schemes and, preserves the federal government's efforts to target resources to the nation's most disadvantaged schools and communities. A bill sponsored by Sen. Joseph Lieberman (D-Conn.) would consolidate some existing programs but also calls for an increase in federal education funding of at least $35 billion over five years, with the additional funds earmarked for the neediest schools and communities. Vouchers also are absent from the Lieberman bill and from a proposal sponsored by Sens. Edward Kennedy (D-Mass.) and Tom Daschle
(D-S.D.). Their proposal focuses on closing the achievement gap by targeting more investment in the Title I program. It also would increase school renovation activities, create $25 billion in school construction bonds, reduce class size and help schools incorporate technology into all classrooms.
Themes common to all the proposals include increased funding for education, local and state accountability for student achievement, and teacher preparation and teacher quality. President Bush is proposing an additional $2.5 billion, or 5.9 percent, in education funding for the current year. The House bill would provide an additional $110 billion over five years for elementary and secondary schools, including funds for school construction and renovation.
