John Berry on the Bush Tax Policy Clown Show

John Berry writes:

The official title of the bill, which President George W. Bush proudly signed into law yesterday, is ``The Tax Increase Prevention and Reconciliation Act of 2005.'' It cuts taxes by roughly $70 billion over the next 10 years.

Nevertheless, Republican Senator Charles Grassley of Iowa, chairman of the Senate Finance Committee, argued the legislation really only extends some parts of the tax code that have expired or would later. ``So I don't want anybody to come over and say we are cutting taxes,'' Grassley said....

The bill's principal provisions involve tax rates on income from dividends and capital gains and the income thresholds at which taxpayers are subject to the alternative minimum tax.... The income thresholds for the AMT have never been adjusted for inflation, so a provision originally intended only to make sure very high income taxpayers didn't escape income taxes altogether is now hitting upper-middle-income households.... Now, they have been extended for one more year, 2006, with an estimated revenue loss of $31 billion.

Low tax rates of 15 percent on stock dividends and capital gains -- and no tax at all in 2008 for taxpayers in the 10- and 15-percent brackets -- were to expire at the end of 2008. Nevertheless, Bush and Republican congressional leaders pushed through a two-year extension, to 2010, at a 10-year revenue loss of $51 billion....

[N]ow all the other major tax cuts passed since Bush became president in 2001 will expire at the end of 2010, two years after he has left the White House. That is going to make fiscal policy a key issue for the presidential candidates of both parties. Are any of them going to tell the truth about the terrible fiscal bind the country is in? Or are they going to pretend, as Bush and more than a few members of Congress have, that tax cuts pay for themselves by generating so much more economic activity that the lower rates yield more revenue that higher rates would have?...

Grassley said former Fed Chairman Alan Greenspan said that the 2003 tax policy ``is responsible for the economic recovery we have had.'' Greenspan approved of the lower rates on dividends and capital gains as a plus for growth. He never came close to saying that the lower rates were responsible for the economic recovery. Careless language on Grassley's part? No, just part of a long-running effort to deceive the American public.