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Jewish World Review March 7, 2001 / 12 Adar, 5761

Jeff Jacoby

Jeff Jacoby
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Consumer Reports

The No. 1 reason to cut taxes -- THE Democrats, being Democrats, dislike President Bush's proposal for across-the-board tax cuts. Their allies in the media, being mostly Democrats too, have joined them in condemning it.

"Voodoo redux," sniffs Bob Herbert in The New York Times. "There will be pain," intones Terry Moran of ABC mournfully. At, Jessica Reaves finds the Democrats' dire predictions "more realistic than the goofily optimistic tone Bush likes to set." Al Hunt, The Wall Street Journal's house lefty, labels the president's tax pitch "a sham." On CBS, Dan Rather assures viewers that Democrats are backed by "independent economists" in pronouncing the tax cuts "risky business" -- but makes no mention of CBS's own poll showing that a whopping 67 percent of the public likes Bush's plan. And there is endless keening that all the benefit will go to the rich, that Social Security will be endangered, and that other federal programs will be starved.

The anti-tax-cut assailants are only warming up. As the din gets louder, those favorable poll numbers are bound to get smaller -- unless Bush and his allies start making the case for tax relief in terms too compelling to ignore. That means focusing attention above all on the most important reason taxes need to be cut. And that reason is -- what?

That tax cuts will provide a kick-start to a slowing economy and lead to years of growth?

They will, of course, just as they always have. The Coolidge tax cut in the 1920s, the Kennedy tax cut in the 1960s, and the Reagan tax cut in the 1980s each triggered a powerful economic boom that lasted for most of a decade. Because they instantly raise marginal after-tax income, across-the-board rate cuts are a tremendous incentive to work more, save more, and produce more. They send bears into hibernation and fling open the gate for the running of the bulls.

Tax relief for all, especially if it is phased in fast, will do more than change the slowdown to a speedup. By getting capital out of nonproductive uses like tax shelters and directing it to savings and investment, tax cuts are an ideal fuel for long-term growth as well. Instead of punishing ambition and success, lower rates will induce millions of Americans to put more of their labor, time, and money to good use. The economy would sing. But there is an even better argument for tax cuts.

Is it that tax cuts will make us more competitive globally?

They will, of course, by making America even more attractive to overseas investors. Compared with other industrialized nations, US tax rates have been low, which is why the rest of the world has plowed more than $9 trillion into our economy. That money has boosted US stocks, underwritten corporate growth, and helped send the American jobs machine into overdrive.

But the rest of the world is catching on. Tax rates have recently been cut in France, Germany, Japan, and Australia. "Most developed countries are now making significant strides to reduce tax burdens," writes Michael Burt at, a top economic web site. If we want to remain the No. 1 magnet for foreign capital, there is no better way to do it than dropping tax rates. But there's an even better reason to cut taxes.

Is it that tax cuts will keep Congress from spending the surplus?

They will, of course, and there is no time to waste: the binge spending has already begun. According to Daniel J. Mitchell of the Heritage Foundation, spending began skyrocketing as soon as a surplus came into view. In 1995-97, the last three years of the deficit era, federal outlays grew by an average annual rate of 3.5 percent. In the three years since, the average increase has been 7 percent.

Bush stressed that point in his speech to Congress. "Last year, government spending shot up 8 percent," he said. "That is far more than our economy grew, far more than personal income grew, and far more than the rate of inflation." But even that isn't the strongest case for tax relief now.

This is:

Taxes must be cut because taxes are too high.

They are too high as a matter of raw dollars and cents. In 1980, federal tax revenues were $517 billion. In 1990, they came to $1.03 trillion. Last year, the total was $2.02 trillion. That is a fortune so vast it boggles the mind.

Taxes are at an all-time high even after taking inflation into account. In constant 2000 dollars, the federal per-capita tax burden -- the total federal tax take divided by every man, woman, and child in America -- was $4,296 in 1980. It had climbed to $5,173 by 1990. Last year it reached $7,238.

Even when compared with the overall economy, taxes are at record-breaking levels. When Bill Clinton came to office, federal taxes were 17.6 percent of GDP. When he left, they were 20.6 percent of GDP. Never in peacetime has Washington consumed more of the nation's wealth.

True, our income has been growing. But taxes have been growing much faster. Since 1992, personal income has risen, on average, 5.6 percent per year. Federal income tax collections, have soared by 9.1 percent.

We are choking on taxes. If you doubt it, add up what you spend on food, clothing, shelter, and transportation. If your family is typical, you spend less on all of those combined than you pay Big Brother in taxes.

The government is swimming in surplus revenues. It has more of our money than it knows how to spend, yet it keeps taking more. That is the cornerstone of the case for tax cuts. It can't be repeated too often, or too loudly.

Jeff Jacoby is a Boston Globe columnist. Comment on this column by clicking here.

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