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Gifts for all occasions in the Galleria! Add your comments on this week's "What is the Deal?" column at Uncle Hiram's Bulletin Board. May 25, 2003 What is the Deal with Tax Cuts? By Jan A. Larson Congress finally passed President Bush's tax cut bill last week albeit a watered down version of tax cut he originally proposed. The final amount of the cut, $330 billion will still go a long way toward boosting the economy and putting more money into the hands of the folks best able to spend it wisely, the American people. No one really knows how much of a "cut" this really is. The $330 billion (plus $20 billion for the states) is a fictitious figure that is based on projections of the revenues the government would take in without the bill. Depending on who is doing the projecting and the assumptions they use, the number is virtually meaningless. The "lost" revenues may or may not have actually been realized. Missing from this figure is how much more revenue the government will receive as a result of the tax cut. Economic stimulus and tax cuts produce more economic activity and that produces increased tax revenue. Some of the Democrats would be well served to take some time off from their tax-and-spend party on Capitol Hill and take a course on economics and another on history and maybe they could figure this out. In a Fox News article, New York representative Charles Rangel, who comes off with about the same level of credibility as the Iraqi Information Minister, was quoted, "This is no victory for people who work every day because eventually this tax giveaway to the wealthy will have to be paid for." Maybe Rangel hadn't read the bill, but it seems to me that sending checks for $400 for each child of every family that claimed the child tax credit in 2002 helps the "working people" quit a bit. All "working people" will also find their paychecks grow in the second half of the year as the withholding rates are reduced and the cut is made retroactive to January 1. On top of that, tax rate reductions that were scheduled to take effect in 2006 were accelerated. Everyone that pays taxes will benefit from this bill for years to come. Sure, the "rich" (those households making around $100,000 per year are considered rich in Washington) will benefit. Tax cuts benefit those that actually pay taxes and the wealthiest pay the most taxes. As I mentioned in a previous column, the people with the greatest wealth don't just sit on it, they spend it, they invest it and they take risks with it. In other words, they fuel the mechanism that creates jobs; jobs that Rangel's "working people" go to each day. In a surprising turn of events, the "pork" that usually is added to tax legislation like so much bacon grease to the gravy was sliced from this bill. According to a second Fox News article, the House version of the tax cut bill did not contain any special interest tax breaks although the same could not be said for the Senate version. Does anyone else find it strange that the Senate refused to go along with a larger tax cut but yet felt no remorse in loading up their stripped down version with special interest tax breaks? At the insistence of the President, the final bill had those breaks eliminated, although I'm sure both the House and Senate members will find another bill to load up with special interest pork. Opponents of the tax cut lament the "lost revenue" and wring their hands over the impending budget deficits. Wouldn't it be refreshing if those in Washington would start to talk about cutting the fat from an already bloated Federal Government instead of worrying about where the money went? When there is less money to spend, there are two options, either spend less or borrow more. Those in Congress have never considered option one. The President's tax cut isn't everything he had hoped for, but it is a good start. Working people, married people, people with children and yes, even the "rich" will benefit. I would say that it is a great day in America. -- Send feedback to the author. The "What is the Deal?" column will appears weekly on the Pie of Knowledge website. Guest submissions are welcome and encouraged. To submit an article to "What is the Deal?" click here. To subscribe to the "What is the Deal?" mailing list and receive early notification when a new column is available, click here. The Pie of Knowledge will never, ever divulge email addresses to any third party for any reason unless so ordered by a court of law. Contributions to the Pie of Knowledge are greatly appreciated. 
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