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Jewish World Review Feb. 26, 2001 / 3 Adar 5761
Philip Terzian
Of the member nations that have adopted the euro, the EU's controversial common currency,
one country enjoys the distinction of boasting Europe's freest economy, lowest taxes, highest
growth rates and greatest increases in productivity: Ireland. And yet which country is being
threatened with EU sanctions for planning to cut taxes? The answer, once again, is Ireland.
"Sometimes the teacher has to punish the best pupil," says Romano Prodi, president of the
European Commission.
The EU claims that a tax cut would fuel inflation. But the Irish government argues that,
given the country's eight percent annual growth rate in the past few years, it can easily
absorb the effect of tax cuts, given Ireland's low labor costs, rising rates of productivity
and deregulated economy. And anyway, the EU's concern about inflation masks the genuine reasons
it is annoyed with Ireland: Resentment and envy.
The larger European economies, notably France and Germany, resent the fact that Ireland
was, for many years, the beneficiary of generous EU subsidies, and the Irish government now
proposes to translate its success into tax breaks for its citizens, not the EU bureaucracy.
That's the resentment part. The envy is grounded in the fact that Ireland's spectacular growth
is made possible by the absence of sclerotic, welfare-state regulations that burden EU members
with sluggish growth and high unemployment.
It may seem an unsophisticated reason to govern fiscal policy, but envy should never be
underestimated as an engine in politics. Envy and, to some degree, class distinction. For that
can be seen here in the gathering debate over Pesident Bush's proposal to honor his campaign
pledge, and reward American taxpayers with an across-the-board, $1.6 trillion tax cut.
Al Gore campaigned against the tax cut by complaining that the nation's wealthiest people
would benefit the most. Candidate Bush never disputed the claim: America's rich inhabit the
highest tax brackets, and pay the most. But the weakness of Al Gore's argument was that George
W. Bush, in seeking the votes of millions of taxpayers, would institute a rate cut designed to
benefit a few thousand people. In truth, of course, the Bush proposal would cut rates for the
wealthy (who pay the greatest percentage of taxes), eliminate taxes altogether for the working
poor and, most important, return a portion of middle-class wealth to where it belongs: In the
bank accounts of the tens of millions of middle-class ratepayers who could use it.
This is deeply disturbing to the political class in Washington, which regards federal
revenue as a G-d-given windfall, and not the hard-earned money of working Americans that the
government expropriates. It is also distasteful to those who are, well, personally
uncomfortable with the whole idea of tax cuts. To them, tax cuts are the favorite cause of
people who used to gripe about fluoride in the drinking water, or who still lament the absence
of prayer in public schools. The best known citizen-taxcutter of modern times was the late
Howard Jarvis, a bumptious California businessman-legislator who wore aviator glasses and
polyester sportcoats, and wrote a book called I'm Mad as Hell. Not quite one of
us, as it were.
An exquisite example of this sort of thinking could be seen in a recent full-page ad in The
New York Times, objecting to congressional proposals to eliminate death taxes. Signed by Bill
Gates' father, financier George Soros, actor Paul Newman, assorted Rockefellers "and more than
200 other signers," it made the explicit point that repealing death taxes would devastate
charitable giving, for which no evidence ws offered. Its implicit point, however, was more
insidious: We're so rich we don't require estate tax reform.
No doubt, such reasoning appeals to the likes of Warren Buffett, or those multimillionaire
members of the U.S. Senate, for whom an extra $1,500 next year is essentially meaningless. But
tax relief is more than returning wages to the great unwashed who earned them, or helping
farmers and small businessmen devastated by death taxes. It is a question of the covenant
between citizens and their government.
Except for a brief, three-quarter slowdown during 1990-91, the United States has enjoyed
nearly two decades of uninterrupted economic growth, a record unprecedented in American
history. The colossal revenues that have flowed into government coffers, creating a surplus,
are not a matter of luck or inadvertence: They are the result of the Treasury extracting
considerably more than its fair share of the American economy. The idea that returning a small
portion of that money to the people from whom it was taken might threaten the fiscal
foundations of government is something only certain Democrats in Congress, and billionaires in
their gated retreats, could
02/21/01: "Something must be done"
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