There are two major common-sense approaches that could be taken in the short-term to help the United States come out of its current recession, while paying for a looming Iraqi invasion and the homeland security challenges that may result from what many are calling an "optional" war.
2. Retain revenues.
The Bush administration's tax restructuring plan does neither. Instead, along with proposing the largest federal budget in the history of the union—over $2.23 trillion—the Bush administration has put together a plan that the White House itself refuses to call an economic stimulus package. One must assume that the White House doesn't think we need an economic stimulus package, or presumably, they would have created something that they could call at least call an economic stimulus plan. If there's anything they're good at, it's naming stuff.
So, with no economic stimulus package on the horizon, the appropriate thing to do would be to retain tax revenues, particularly given the president's desire to raise spending this year by tens of billions. Right?
Wrong again. The president's "run-it-like-a-business" plan is to put together the largest (in pure dollars) deficit in the history of the nation, projected at $307 billion this year (which beats his father's record of $290 billion). And here's an interesting asterisk—those numbers don't account for a war against Iraq, which would be funded by additional congressional appropriations once the bombs are falling, perhaps to the tune of $50 billion more.
If this country were actually a business being run by this administration, we guarantee it wouldn't be paying a dividend.
Now, we harbor no illusions that running a government is easier than running a magazine (which we happen to think is challenging), nor do we feel that it's appropriate to blame the continued economic slowdown completely on Bush's handling of the economy. After all, business is cyclical, the lunacy of the Internet boom did long-term damage to middle-class savings, and corporate fraud heaped on extra problems for many investors and workers' 401K plans.
It's just that the current White House plan clearly isn't designed to help much—the bulk of the Bush plan is a straight-line political gambit. How can one tell? Because the solution doesn't fit the problem. Instead, the tax package is designed to do little more than appeal to two fundamental party-line Republican constituencies: 1) people ideologically opposed to progressive taxation and 2) old-economy industrial business interests—oil, gas, chemical companies.
The usual suspects, frankly.
Yes, there exists in this country a double-taxation system for dividends (the corporation gets taxed on the income then the shareholder gets taxed on the income), and it'd be sort of cool for recipients of dividends if they weren't taxed. But, that's how the system works right now. That's revenue, currently.
The Bush administration says that eliminating the dividend tax would help the middle class—however, the middle class actually has a good deal of its investments in 401K plans, which means dividends are tax-sheltered already. The White House Web site says seniors are disproportionately hit by dividend taxes—OK, we say give seniors a dividend-income tax credit. They've earned it, and it would be a prudent thing to do. But putting tons of cash in the hands of the wealthiest seniors seems unlikely to spur investment in small, zippy little businesses that will create jobs and elevate middle class entrepreneurs.
The truth is, this is nothing but an ideological swipe at the tax system in America. And it's the wrong time to undertake it. Instead of shrinking government (which, frankly, no Republican administration actually seems capable of), the Bush administration is turning the "small government" Republicans into the new "borrow-and-spend" party. If we're supposed to get on the lower-revenue bandwagon with Bush, he's got to show us some spending cuts. And, no, we don't mean going after Head Start.
Indeed, the Bush administration has had a very tough time explaining how a dividend tax cut would help spur economic investment, as the bulk of high-growth, high-tech corporations don't pay dividends. It's generally more staid, industrial sectors that pay dividends—and suddenly we're back again at the oil, gas, chemical, aerospace, tobacco and automotive, etc. industries. Bush knows who his friends are.
Meanwhile, the unfunded and underfunded mandates by this administration in the areas of education, homeland security and unemployment benefits are putting the squeeze on state and local governments that could use—at the very least—help from the federal government to pay for programs that the federal government mandates.
We don't disagree that the tax system of ours could use a good, stern talking to. (In our foray into the magazine world, we've learned that the first thing the IRS could do is put the address where they want a form sent in the form's instructions. Call us crazy.) But this is not the time to do it. These are tough times that call for steady government revenues to pay for new security programs, a hungry war machine (an Iraq attack would likely be quick and more of a drain than a stimulant for the economy) and unfunded federal mandates.
Help people who need help, including the states, schools, police and homeland anti-terror interests, working people, and the soldiers and their families. But let's save the tax-system tinkering for the next boom.
"But letís save the tax-system tinkering for the next boom."
Great. Then I eagerly await your future editorial in opposition to Mississippi HB 396, the Mississippi Optional Sales Tax measure. There is simply no need to provide local municipal authorities with an ability to increase local sales taxation to pay for not-needed-now projects while the State economy remains in such doldrums.
Oh, but wait. The biggest proponent of HB 396 is Jackson's King Harvey Johnson himself. In fact, King Harvey is lobbying local House Representatives to support and push (read ram through) a Jackson-only version of the bill in the event agreement on a statewide measure can't be reached. The King wants to increase sales taxes to pay for a new "Capital City" Convention Center -- the same project that would serve as the centerpiece of the downtown redevelopment push which occupies so much of the JFP's editorial fixation.
So what will it be? Is it double-standard time for the JFP? Is this type of "tinkering" during hard economic times going to fly? Can the King afford to alienate more of Jackson's citizenry and further catalyze the already raging tax base migration out of the City? Is this crusade to redevelop downtown Jackson just too darn important to push out to the next boom?
Please tell JFP, what is your position on the tax-system tinkering HB 396? Progressive minds eagerly want to know.
Oh, c'mon Smitty. A sales tax is regressive! Where do you think we stand? ;-)
While we haven't convened the ed board to discuss it, my position would be *no* on a sales tax, because, aside from the regressive nature of sales taxes, a close reader would know the JFP is not sold on the need for a downtown convention center.
I personally believe that downtown revitalization can be done in (1) smaller ways that serve the needs and encourage the development of the creative class of professionals and artists that are generally on the vanguard of urban renewal and (2) in public/private partnerships that move away from the single-use, municipal-monolith theory and toward a more balanced approach that takes small business, residential and entertainment/cultural interests into account.
Does that mean I believe Jackson has no right to local option taxes? Au contraire. I wouldn't mind hearing about a *commuter tax* that would enable some of our suburban-dwelling brethern to shoulder a bit of the load for repairing the streets and infrastructure they enjoy daily until they make their escape on the interstates. That's some tinkering worth chatting about.