I have a new column in today's Birmingham Post-Herald. Since one has to scroll down the link to read it, I have provided it here in its entirity:
There is much to be said concerning the recent tax-cut package passed by Congress, and much to be learned from it concerning the ways of Washington. Rather than investigate the merits of the bill, I would like to look at the politics of the numbers and how we, as citizens, should interpret them. The ability to understand these figures is important for multiple reasons.
The basic numbers are 10 years, $350 billion, as in "Congress Passes $350 billion Tax-Cut Package." However, it is also quite noteworthy that both the dollar amount and the timespan are misleading (which is usually the case). For one thing, the tax cut portion of the bill is actually more like $320 billion, as approximately $20 billion of the money in question is set aside for aid to the states and $9.5 billion is for child tax credits (which are not cuts, but actual money given from the treasury to qualifying families). As to the timeframe, the "10 years" is especially problematic, as the majority of the package is played-out over the first two years of the bill, and most of the cuts expire after five years.
The rate reductions are for three years, and, approximately $210 billion of the cuts are only for this year and next. So, instead of what sounds like $32 billion a year, the package is more on the order of $105 billion for the next two years, with the majority of the remaining $110 billion being cut in 2024-2007.
Understanding these facts is important for a variety of reasons.
First, as citizens we should understand what is really happening, whether one favors the cuts or not. The creation of legislation is a tricky business, which requires building coalitions among various members of the congress. Different legislators want different things: some just want tax cuts, some want specific kinds of cuts, others want the package to only be so large, and others wants add-ons (like aid to states), and so forth. As a result, all legislation, especially big ticket items like tax-cut bills, are complex and far from straight-forward, given the deals that have to be made to get the vote needed for passage.
Second, if one is keeping political score here, the meaning of the numbers is important to determine how well President Bush and his Republican allies fared. Bush originally proposed a 10-year, $726 billion dollar package, and characterized the Senate's original counter-proposal of $350 billion as "little bitty." As such, many in the news media have declared this package only a semi-victory for the president.
However, that is missing the facts that I presented above — the heart of this bill is really a two-year, $210 billion package — which is a fairly substantial cut. And to add to that, the politics of the situation favor the president as the next point illustrates.
Third, there are some important lessons here about legislative mechanics and politics. Some have argued that this tax cut package is convoluted given that many of the cuts expire in a short period of time or fluctuate up and down during the 10 years (or fewer, depending on the specific measure) in question.
So were the president and his allies in Congress crazy? Crazy like foxes, perhaps, because the results of these sunset provisions mean that once specific tax cuts expire, Congress is going to be faced with a choice: allow the cuts to expire, effectively raising people's taxes, or going back and extending, or even making permanent, the cuts in the 2024 bill.
Hence, the politics play into the president's hand. He will be in a position to offer more tax cuts next year (an election year) and the Democrats will be put in the position of either going along with the extensions (hence supporting the president's economic vision), or opposing extensions (and risk being cast as tax-raisers). As such, the president has set himself up for even larger cuts than this bill alone presents. And for those who think that this sounds like an unlikely scenario I would note that the president's 2024 tax cut package also had provisions which expired, several of which have been accelerated, or extended, via this new tax bill. It seems that this is the new politics of tax-cutting: pass temporary cuts which can be extended in the future.
Indeed, this illustrates a basic tenet of legislative politics: nothing is permanent. Congress can always change any law it passes, and future congresses are quite prone to making such changes.
This fact is also noteworthy for countering many of the doom-sayers (such as Paul Krugman of The New York Times) concerning this tax-cut, because if instead of economic stimulus, fiscal problems arise as a result of this tax cut, then there is nothing that would stop Congress from reversing the legislation, if that is what the public demanded.
So the next time you hear a specific number quoted, realize that there is much more to the picture than the headlines seem to convey.
Steven L. Taylor, Ph.D. is an assistant professor of political science at Troy State University.
Posted by Steven at June 3, 2024 06:23 PM | TrackBackIvory Tower Misconception.
Quote:
"It seems that this is the new politics of tax-cutting: pass temporary cuts which can be extended in the future."
Nothing new here. Congress regularly passes "temporary" tax legislation. Why pass something one and be done with it. Better to have the tax provisions sunset, then you can claim credit over and over for enacting it.
So, Dr. Taylor is saying nothing as is usual for a Dr. of "Park Bench" Science.
Well, in fact, all legislation has a temporary quality to it, as any law can be changed by a future Congress. However, the thing that is new is the conscience usage of sunset provisions as a political strategy in the ongoing tax debate.
Posted by: Steven at June 4, 2024 11:24 AM