Sunset taxes

If anyone buys for a minute that the proposed sunset provisions on Bush's tax cut (which are being offered as a "compromise") will actually ever go into effect and cancel the cuts, they deserve to face great ridicule and embarassement for their gullibility.

Seriously, much of Bush's first big tax cut was justified (and made "affordable") by putting in sunset provisions that would rescind the taxes after a given number of years. Efforts have already been made and are underway to eliminate those sunset provisions and make the cuts permanent. Sunset provisions were built into the USA PATRIOT act, and efforts have been made (though, thankfully, they've since been withdrawn) to elimiate those sunset provisions as well.

Sunset provisions are, in essense, meaningless, especially if they're offered as a way to get a controversial or unpopular bill through. Those who vote for the bill with the sunset provisions are trying to do what they think will make those in power happy while still being able to tell their constitutants that they're not "really" giving in, and those who propose them do so with the goal that the sunset provisions will eventually be removed and the bill made permanent.

In general, the rule of thumb should be that if you wouldn't vote on it as a permanent thing, don't vote on it as a temporary one, either, since odds are good, someone will try to make it permanent anyway. At least one White House official has acknowledged as much:

In a rare display of GOP discord, Kevin Hassett, an American Enterprise Institute economist with close administration ties, posted a Web site editorial calling the emerging Senate plan “one of the most patently absurd tax policies ever proposed.” The plan would discourage companies from offering dividends over the next two years, he said, and could harm the economy Bush wants to help.

But administration officials say the president’s goal of completely eliminating the tax on dividends that are paid out of fully taxed corporate profits — even if for only a year or two — justifies such contortions. The White House has said that its original plan would spur short-term and long-term economic growth.

The financial markets will assume that Congress will not allow the dividend tax cut to be phased out, a White House official said, acknowledging that the dividend plan’s true cost would be far higher than the proposal’s official tally indicates.

“There may sometimes be a distinction between policy and law,” the official said. “We are fighting for the policy. The law will just have to catch up.”

Fortunately, it appears that not all are in agreement that this "compromise" proposal is a good idea:

IN ITS dogged pursuit of the dividend tax cut, the White House is pushing a temporary version that even some Republicans openly deride as bizarre and economically suspect. Under the proposal, the elimination of what has been called double taxation of dividends would be phased in — one-half next year, 75 percent in 2005 and 100 percent in 2006-07. Then, the current dividend tax rate would suddenly reappear.

That timetable technically would hold the plan’s cost at $120 billion over 10 years, far less than the $396 billion that Bush originally proposed. It is designed to fit within the Senate leadership’s self-imposed budget limit and make room for other tax cuts.

Some Democrats, though, are thinking of voting for this thing - in one case, on the condition that some money be made available to state government, which are suffering from extremely tight budgets. While I agree that state government need help, and fast, I can't agree that this is the way to get it. In the long run, the tax cuts will cost considerably more than the financial mechinations being proffered now make it appear, and that money will have to come from somewhere - and usually its in the form of less money for states to carry out federal mandates. This means that while state governments may get some immediate financial relief out of this mess, in the long run, they'll get hit even harder.

One thing I hope someone got on film is that, according to the article, Bush, stumping for his tax cut yesterday in Indianapolis, said he would not raise taxes to balance the budget. We need to get every single example of him saying anything about how he won't raise taxes for whatever reason he may give, as it may just help create a "no new taxes" variation for 2004.

Posted by thorswitch at May 14, 2003 04:57 AM | TrackBack