On tax cuts: the torch is passed

Posted: Feb 06, 2001 12:00 AM
What a spectacular and wonderful week, my fellow Americans, to talk about tax cutting -- the week of Ronald Reagan's 90th birthday. Cheers! Whoopee! Here's to a man who, in addition to other considerable virtues, understands economics. Oh, you won't get a certain kind of Washingtonian to admit as much. "Most Democrats,'' says House minority leader Dick Gephardt, "don't want to repeat the mistake we made in 1981.'' Mistake? What mistake? Cutting taxes broadly? Reinvigorating a half-dead economy? Igniting a 20-year round of prosperity that has yet to sputter out? Capitol Hill Democrats have acknowledged, ruefully, that they must accede to some kind of tax cut. With Alan Greenspan's endorsement of lower rates, no significant excuses remain. But caving in too readily to Bush and his plan for an expedited $1.6 billion, 10-year, across-the-board tax cut, would undermine Democratic ideology, which maintains that tax cuts are for the "wealthiest 1 percent.'' (In a pre-election column, I mistakenly rendered this piece of demagoguery as the "wealthiest 2 percent.'' Will Murchison, age 22, just out of college and working full time, brought me up short; he knew -- did he ever! -- how much the government was withholding from his undernourished paycheck and how deceptive Al Gore's rhetoric was about the rich.) "No American,'' Bush now declares, "should pay more than a third of his income to the federal government.'' That was the same share medieval serfs turned over to their liege lords. Seems to be a lot of that going around these days. Throw in state and local taxes, and Americans pay almost 40 percent to government -- more than the cost of food, shelter, housing and clothing combined. Yet, since 1985, federal revenues have increased by $735 billion. Ronald Reagan -- who in his Hollywood career found the government helping itself to 94 percent of his income -- understood the malign effects of high taxes. "The more government takes in taxes, the less incentive people have to work,'' he would declare in his memoirs. "Any system that penalizes success and accomplishment is wrong. Any system that discourages work, discourages productivity, discourages economic progress, is wrong." "If, on the other hand, you reduce tax rates and allow people to spend or save more of what they earn, they'll be more industrious; they'll have more incentive to work hard ... The result: more prosperity for all -- and more revenue for government.'' Common sense, affirmed Reagan. But in politics, as we know, common sense often yields to special pleading. Liberals and Democrats (often the same commodity) couldn't claim credit for cutting taxes; the inspiration was Reagan's. The need was therefore to posit tax cuts as a bad idea likely to inflate both federal deficits and rich people's bank accounts. Numerous liberals, for ideological reasons, actually believed what they said. Even so, in July 1981, Congress cut the rates by 25 percent over three years. Forty House Democrats went along, cheerfully or resignedly. The tax cuts proved wondrously successful. Revenues fell at first -- as intended. In the '80s, despite a brief recession, the tax take rose 99 percent, middle-class incomes, 28 percent. America was feeling its oats -- with no accompanying fears of the government's dropping by, demanding a bigger piece of the action. Deficits increased, not because of tax cuts, but because of the human propensity (congressmen, contrary to report, are human) to spend every nickel. Doctors paint a gloomy picture of Ronald Reagan on his 90th birthday: a man with broken bones and Alzheimer's. That would be the physical side of it. The physical is never all. Philosophically, morally, the 40th president has passed the torch to the 43rd, who grasps it with enthusiasm. George W. Bush may just get this thing done. Not that we bloated plutocrats are likely to call our brokers 'til Brother Gephardt's fists uncurl!