Clicking on banner ads enables JWR to constantly improve
Jewish World Review June 18, 2001 / 28 Sivan, 5761

Amity Shlaes

Amity Shlaes
JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Ann Coulter
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
David Limbaugh
Michelle Malkin
Chris Matthews
Michael Medved
MUGGER
Kathleen Parker
Wes Pruden
Sam Schulman
Amity Shlaes
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports

Show pity for Alice in Tax Wonderland


http://www.jewishworldreview.com -- Rebate (noun): a return of a part of a payment. Taxpayer (noun): one that pays or is liable for a tax.(Merriam-Webster Collegiate Dictionary)

"What does the new tax law mean to me?" US citizens are asking. Alas, the answer is not clear. Responsibility for the confusion lies partly with the bill's authors: the changes are complex. But a larger share of the blame belongs to those who wish to deprive President George W. Bush's team of the political victory they know the tax cut represents. These obfuscators include many lawmakers, especially Democrats and left-leaning think-tanks. The press is also doing its part. The tactic is enough to make the muddled citizen feel like Alice in Tax Wonderland.

Consider, for starters, this year's rebate. Married couples will get $600 back in October or before. Singles get $300. Or do they? Not according to the Queens of Hearts and the March Hares who tend to set opinion. Take Citizens for Tax Justice, a think-tank whose interpretations of tax news are often reprinted or paraphrased on television or in the newspapers. This week CTJ sent out a blast with the title, "51 million taxpayers won't get full rebates from 2001 tax bill".

But who exactly are these 51 million whom Uncle Sam is short-changing? They are households with income below $40,000 or so. Under current law, this means that they pay little or no income tax, or even get extra money back through the federal programme known as the Earned Income Credit. In Alice's terms - the terms of common sense - it is actually impossible for these citizens to get a "rebate". A rebate, as the dictionary tells us, must be made on a payment, and these households never made one in the first place. These citizens are not even, pace CTJ, taxpayers in the sense that most of us understand the term (people who pay income tax). So a more accurate headline might be "Rebates go to all taxpayers; those who don't pay taxes won't receive additional subsidy".

Yet the press generally followed the CTJ line, running headlines such as "Your rebate check may or may not soon be in the mail" (Pittsburgh Post-Gazette); "Tax rebate may disappoint" (Arizona Republic); "Tax rebate will bypass many, study finds" (New York Times). This is not to say the non-recipients don't pay money to the government. They all - if they work legally - pay Social Security, as well as Medicare contributions. Combined, these social programmes demand at least 15 per cent of worker pay from the first dollar earned - historically the highest share ever. But the critics who want to take the joy out of the rebate party tend to be those who insist that Social Security and Medicare are not taxes at all but "contributions" to two hallowed federal insurance programmes. As Humpty Dumpty said to Alice, "When I use a word, it means just what I choose it to mean - neither more, nor less."

Similar sophistry is evident when it comes to the two greatest flaws in the tax legislation: its slow schedule for implementation and the so-called "sunsetting provision". The latter is particularly outrageous, for it means that all the tax cuts written this year will disappear like the Cheshire Cat come 2011, leaving us - unless lawmakers act again - back at the current rates.

Senator Tom Daschle, the new majority leader, expressed typical concern about timing issues last month: "I will simply say this is the Democratic approach to meaningful tax relief this year, tax relief that can be realised this year, not seven or eight years from now . . . tax relief that recognises we also have other very important priorities, priorities involving paying down the debt."

Why is it, though, that the new rates are not becoming law right away. The White House would gladly have made all its tax cuts law in the first year. Economically, this would have been right. An across-the-board rate cut introduced at once has, after all, a far greater claim to be a stimulus than one phased in over several years. Yet the opposition as led by Mr Daschle, as well as many of the self-identified fiscal conservatives within the Republican party killed this plan as "too expensive". They focused on paying off the federal debt. Pro-tax-cut forces caved in and designed a schedule that didn't look expensive on paper.

As for sunsetting, it results from budget law arcana and could have been overridden by the very lawmakers who are mocking it now. But Republicans did not find enough allies in Congress. Few have pointed this out, of course, but what can we expect of life in the rabbit hole?


JWR contributor Amity Shlaes is a columnist for Financial Times . Her latest book is The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.

Up

06/13/01: America must take a French lesson in trade
06/11/01: Time to dream the impossible dream for Iraq
06/07/01: Whatever happened to simple?
06/04/01: When the relationship between companies becomes as close as a marriage, the eventual break-up is often very painful
06/01/01: Loving and hating the Bush tax bill
05/30/01: Will Grisham soon be unemployed? In America's courts these days, there's no room left over for legal fiction
05/22/01: Republicans sample the rhetoric of confidence
05/16/01: Boeing has been promised $60m to site its headquarters in Illinois. The deal looks a poor one for taxpayers
05/14/01: Adam Smith in love
05/09/01: Those rotten Russian capitalists
05/07/01: Why tax havens provide shelter for everyone
05/04/01: Middle classes pay for get-the-rich folly
05/01/01: Money can't buy happiness? Think again.
04/26/01: Calling America's rogues and entrepreneurs
04/19/01: High earners right to feel lonely at the top
04/11/01: The right must learn the comfort of strangers
04/04/01: When domestic law arrives by the back door
03/30/01: A Lexus tax cut suits the jalopy driver
03/27/01: The unchallenged dominance of King Dollar
03/20/01: Natural selection of an intellectual aristocracy
03/16/01: The hidden danger of a regulatory recession
03/14/01: Is the American condition that boring? Why so many Oscar nominated movies aren't set in America
03/07/01: Trampling on the theory of path dependence
03/05/01: Fighting the good fight
03/01/01: It is time for Fannie and Freddie to grow up
02/27/01: IT's important
02/22/01: The guilty conscience of America's millionaires
02/14/01: The benefits of helping the 'rich'
02/09/01: The Danger and Promise of the Bush Schools Plan
02/05/01: Crack and Compassion
01/31/01: Debt is good
01/29/01: Clueless
01/24/01: A gloomy end for a half-hearted undertaking
01/17/01: The challenge of an ally with its own mind
01/15/01: An unexpected American family portrait
01/10/01: A fitting legacy for America's beloved dictator
01/08/01: The trick of tax 'convenience'
01/03/01: Time to stop blaming Greenspan over taxes
12/11/00: So smart they're dumb
12/06/00: How economic bad news came good for Bush
12/04/00: The Boies factor
11/30/00: "The inevitable demands for recounts erupted like acne…"
11/28/00: Fair play and the rules of the electoral game
11/23/00: The shining prospect beyond a cloudy election
11/21/00: Try the Cleveland model
11/16/00: A surprising winner emerges in the US election
11/09/00: Those powerful expats
11/07/00: What's right for America versus what works
11/02/00: Time to turn off big government's autopilot
10/30/00: Canada beating America in financial sensibility
10/26/00: When progressiveness leads to backwardness
10/24/00: The most accurate poll
10/19/00: The Middle East tells us the hawks were right
10/17/00: The split personalities of America's super rich
10/10/00: 'Equity Rights' or Wake up and Smell the Starbucks
10/04/00: Trapped in the basement of global capitalism
09/21/00: The final act of a grand presidential tragedy
09/21/00: Europeans strike back at the fuel tax monster. Should Americans follow?
09/18/00: First steps to success
09/13/00: America rejects the human rights transplant
09/07/00: Minimum wage, maximum cost
09/05/00: Prudent Al Gore plans some serious spending
08/31/00: A revolution fails to bring power to the people
08/28/00: A reali$tic poll
08/21/00: "I Goofed"
08/16/00: Part of the union, but not part of the party
08/09/00: Silicon Alley Secrets
08/02/00: Radical Republicans warm up for Philadelphia
07/31/00: I'll Cry if I Want To
07/27/00: Cold warrior of the new world
07/25/00: The Estate Tax will drop dead
07/18/00: Shooting down the anti-missile defence myths
07/14/00: A convenient punchbag for America's leaders
07/07/00: How to destroy the pharmaceutical industry
07/05/00: Patriots and bleeding hearts
06/30/00: Candidates beware: New Washington consensus on robust growth stands the old wisdom on its head
06/28/00: White America's flight to educational quality
06/26/00: How Hillary inspired the feminist infobabes

© 2001, Financial Times