Check's in the Mail - analysis of George W. Bush tax cut

Reason, August, 2001 by Michael W. Lynch

How the tax cut went from impossible to inevitable

Shortly after this double-issue lands in your mailbox, so too will a check from the federal government, ranging from $300 for singles to $600 for married folks. It's not a gift from the feds-it's your money, the result of a new 10 percent tax bracket. It's an income tax cut, effective this year.

This wasn't supposed to happen. Just as people "know" Bush is a policy lightweight, they also knew that tax cuts were damn poor politics. According to the conventional wisdom, a tax cut proposal was perhaps necessary in the Republican primaries, to fend off the likes of Steve Forbes. But it was supposed to be a non-starter with the broader public, which would rather have the money invested in schools or light rail. After John McCain opened a can of whoop-ass on the tax-cut-touting Bush during the New Hampshire campaign, beating the Texan 49 percent to 31 percent, press sages declared that even Republicans had no interest in tax cuts. The question many were asking was how Bush-who was known for locking his little mind on one or two issues and pursuing them doggedly--could de-emphasize tax cuts without appearing feckless.

"The broad message coming out of Tuesday's New Hampshire primary is that the primacy of tax cuts in Republican politics has been demolished," declared political analyst Charlie Cook in February 2000. Writing in the influential weekly The National Journal, Cook opined that the Republicans were finished, since as tax cuts go, so goes the GOP: "The only issue that really separated Democrats from Republicans has been taxes. Now, not even Republican primary voters in notoriously tax-averse New Hampshire respond to the siren song of tax cuts the way they used to.

Maybe not, but candidate Bush turned his siren song into a rousing tune, telling voters that it's taxpayers' money, not the government's; that tax cuts are an insurance policy against a slowing economy; and that they provide a greater incentive to work. Listen to the Not-So-Great Communicator himself: "It is not just the amount of taxes that matters, it's also what the economists call a taxpayer's marginal rate: the taxes we pay on every extra dollar we earn," said Bush, outlining his proposal in December 1999. "That rate determines the incentives to work."

"In my judgment, what's risky is to leave a lot of unspent money in Washington because guess what's going to happen," he argued in the January 10 Republican primary debate. "It's going to be spent on a bigger federal government." At a Florida high school in March, he reiterated, "Giving people their money back serves as an insurance policy against economic downturn."

A funny thing happened: Even as the pundits chided Bush for sticking to a message that they said no one wanted to hear, and even as Al Gore attacked it as a "risky tax scheme" and "economic snake oil," it was Gore at first, and later Democrats in Congress, who had to make adjustments. Polls may show that the public is lukewarm on tax cuts. But that may be because promises of tax cuts since Reagan have far exceeded their reality.

Bush crafted a tax cut that benefited most of the Republican target market. He offered across-the-board rate cuts for everyone, including the rich, doubled child-tax credits for the pro-family folks, and increased the caps on education savings accounts. He fired back at charges that the rate cut unfairly benefited the rich by saying that everyone who pays income taxes will enjoy a cut under his plan. He marketed the benefits to the great American middle class with carefully selected tax families, who he claimed would get to keep $1,600 more of their hard-earned money every year.

When Cook declared tax cuts dead, Gore was offering $250 billion over 10 years in "targeted" tax cuts. By June 2000, Gore had doubled his offer to $500 billion. By winter, congressional Democrats were offering a $900 billion tax cut plan, though without rate cuts for high earners. Bush stood firm at $1.6 trillion, a sign, Washington insiders noted, that he was unwilling to move to the middle to govern. This May, Bush indicated he would accept a $1.3 trillion cut. And on May 26, 108 days after he sent his tax cut proposal down Pennsylvania Avenue, Congress passed a 10-year, $1.35 trillion cut. Twenty-seven Democrats joined every Republican in the House and 12 Democrats joined 46 Republicans to support the bill in the Senate.

"Bush staked his presidency on it," says Grover Norquist, president of Americans for Tax Reform, who lobbied hard for the tax cut. "The Bush presidency would have been over if he didn't get it, so everyone who wished him well had to support him." Norquist notes that Bush also assured supporters that this tax cut was the beginning, not the end, of his tax reform efforts. The result: The widely predicted feeding frenzy of business and other interest groups seeking to include their special provisions in the tax bill didn't happen. Says Norquist, "We spent very little time fighting ourselves and all of our energy passing the cuts."