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News & Views |Bush Unveils $483 Billion Tax-Cut PlanWednesday, December 1, 1999 OnLine Republican presidential front-runner George W. Bush November 30 unveiled his campaign proposal to reduce taxes by $483 billion over a five-year period. The Bush proposal provides for a substantially larger tax cut than the one passed by congressional Republicans (H.R. 2448) and vetoed by President Clinton in September. The Bush plan is expected to cost $1.14 trillion over 10 years compared to the vetoed
tax bill that would have cost $792 billion also over 10 years. Like congressional
Republicans, Bush would pay for his tax cut with on-budget (non-Social Security)
surpluses. However, according to Congressional
Budget Office (CBO) estimates, the surpluses for the first five years of the Bush plan
(2002 to 2006) would total only $463 billion. This is less than the $483 billion needed to
cover the tax cuts and any new domestic programs a Bush administration may propose. Bush
believes CBO forecasters (the official budget estimators for Congress) are too
conservative and that government revenues will be higher than they predict. |
The Bush plan:
Notably, the plan does not include further capital gains cuts. Reaction to the Proposal The plan is more generous to taxpayers in every income category than the vetoed tax-cut bill. It is likely to be embraced by conservatives, although some will be unhappy because it does not contain a capital gains tax cut. There will also be criticism from those conservatives who would prefer to see the current tax system changed to a flat tax. Democrats will criticize the plan as cutting the taxes of high-income individuals too much. The most important effect of the proposal may be to make congressional action next year on a tax bill that President Clinton would sign even more unlikely. For businesses, the reinvigoration of a veto-driven tax legislative strategy would
further reduce the prospects for anti-tax planning legislation, such as Rep. Lloyd Doggett's, D-Texas, bill to
discourage corporate tax shelters. It also would defer, however, consideration of the
substantive business tax cuts included in the tax bill vetoed in September. If Bush uses
all of the on-budget surpluses to fund tax cuts, revenue-raising measures (which are
effectively tax increases) may be needed to pay for any additional spending increases or
tax cuts proposed by his administration. |
The Specifics The Bush plan would reduce tax rates by:
These changes would reduce much of the effect of the so-called marriage penalty for double income couples. The Bush proposal would go even further by providing a second-earner deduction equal to the lesser of 10 percent of earnings or $3,000. The proposal would increase the child credit to $1,000 (from $500) and make it available to taxpayers with incomes up to $200,000 instead of the current law limit of $110,000. The Repercussions The Republican leadership on Capitol Hill will have to decide what to do with this proposal next year. Assuming Bush is successful in nailing down the Republican presidential nomination at an early date, the party may want to push this program as a way of framing the election debate. The Republicans may see an advantage in forcing President Clinton to veto yet another tax cut. For their part, Democrats would likely welcome such a fight, believing that criticism
of the proposal as tilted toward the wealthy would play to their core constituencies.
Democrats also would criticize Bush’s use of all of the on-budget surpluses as a
threat to budget stability. This could appeal to moderates in both parties. If the
Republicans in Congress do not try to move the Bush proposal, Democrats will likely taunt
them by saying that even congressional Republicans see problems with the plan. |
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