GOP needs to make a down payment

Posted: Dec 05, 2006 3:55 PM

Are the lame-duck leaders of the failed 109th Congress like the Bourbon kings of France who, Talleyrand once said, “learned nothing and forgot nothing?” They will have a chance to signal a steepening of their learning curve when tax-credit legislation comes up for their consideration during the lame-duck session this week.

One of the hallmarks of the centrist positioning, so potent in the Clinton administration, was the use of targeted tax breaks to achieve the same ends as tax-and-spend legislation once did — to enhance specific and important social outcomes. Some of the most effective tax credits have expired this year and, unless Congress renews them at this session, they will vanish from the 2006 tax forms.

The best include:

$3,500 tax credit for the first year for employers who hire a former welfare recipient.

Tax deductions of up to $4,000 for higher-education tuition. Five million families took this deduction in 2004.

Deductions for state and local sales taxes in states with no income tax — Florida, Texas, Alaska, Nevada, South Dakota, Washington and Wyoming — states with about 20 percent of the nation’s population.

A 20 percent tax credit on businesses’ R & D costs.

Perversely, it is the popularity of these tax credits that makes them so hard to renew because, like a Christmas tree, they are targets for ornamentation — amendments that offer less popular and pressing special-interest tax breaks.

Republicans, in particular, have tried to hold their renewal hostage to further reduction or total repeal of the estate tax. But repealing the so-called “death tax” would benefit just 8,200 people who are organized into a mega-millionaires’ lobby. For them, the repeal could mean billions.

Last year, Senate Majority Leader Bill Frist (R-Tenn.) demanded that legislation to raise the minimum wage be tied to reduction of the estate tax, saying “it’s all or nothing” — a quid pro quo deal. That kind of reasoning may have had a lot to do with the loss of the Republican majority in the Senate.

Ronald Reagan sold tax reduction as a tool for middle-class empowerment. Clinton took it one step further by harnessing the reduction of taxes to specific steps to advance social good, much as federal expenditures once tried to do. But the Republicans held these tax breaks hostage, demanding, in addition, passage of tax breaks that have nothing to do with social progress and only make very rich people very much richer.

For their part, the Democrats want to hold these tax breaks hostage to an increase in the minimum wage. While raising the pay of millions of workers certainly outranks cutting the estate tax for a few thousand, it doesn’t belong in this bill. Let the Democrats pass the higher minimum wage and, better yet, index it for inflation as we do Social Security benefits, on their own time when they take over in January.

But if the Republicans want to use this lame-duck session for a down payment on the idea that they got the message of Election Day, what better way to do it than to extend tax breaks for employers who hire former welfare recipients, kids trying to afford higher education, and businesses trying to compete through R & D in the global economy?