The recent tax-cut proposals outlined by George W Bush were greeted with resounding cheers by the Republican camp but the Democrat Convention will most certainly raise its objections, particularly when a closer look at the plans reveal their cost is actually more than originally proposed and the more advantageous tax benefits would go to those with high incomes.
Bush's tax agenda is pretty exhaustive - it includes doubling child tax credit; applying a tax cut of up to $3000 for dual income couples; providing charitable deductions for tax payers who do not claim deductions; enlarging education for Internal Revenue Assessments (IRAs); eliminating estate taxes; establishing a tax credit for lower income groups in order to purchase health insurance; and tax breaks for long-term care.
The proposed tax plan forecasts the cost of the scheme to be $460 billion over a period of five years. However, this sum is likely to be a major underestimate. According to a news report from the CNN Financial Network, $460 billion over five years is a gross miscalculation because US budget plans are viewed by Congress over a ten year period when tax schemes are introduced in phases with the largest tax cuts implemented after five years. Consequently, the cost of Bush's tax plan, when calculated over a ten year period, would be nearer $1.6 trillion. This figure is calculated by the Congressional Joint Committee on Taxation, which aims to provide "nonpartisan technical analysis and revenue estimates of tax legislation." However, because tax reduction schemes are introduced in stages, the annual expense increases, thus even this figure of $1.6 trillion is likely to be an underestimate.
A further point of contention in Bush's proposed tax scheme is the issue of tax benefit distribution. Bush says that his proposed tax cuts would be particularly advantageous for low and mid-income groups, when, in fact, the Joint Tax Committee forecasts that under such a scheme more than 50 per cent of tax breaks in 2005 would go to taxpayers who enjoy six-figure salaries.
According to the US organization, Citizens for Tax Justice, once the proposed tax cuts were in full operation, almost 60 per cent of those cuts would benefit the top 10 per cent of taxpayers at an average cut of $6410 each year. Conversely, the bottom 60 per cent of taxpayers would possess below 13 per cent of the tax reductions, which would average at $227 each year.
Al Gore would not be fulfilling his role if he did not condemn the Republicans' tax proposals, but Bush appears to have made it easy for him - the $1.6 trillion sum is double that which President Clinton vetoed in 1999 and is three times the size of Gore's tax cut proposal of $500 billion. The Gore camp released a statement condemning Bush's proposals by arguing that the cost of the tax plans would consume the Government's remaining budget, which 'leaves no money for any other important investments and could force cuts into programs such as Medicare and Social Security.'
According to the Republicans, the emphasis on tax simplification in Bush's plan would require the IRS to be slimmed down. In a party platform, the Republicans announced: 'Within the simpler and fairer tax system proposed by Governor Bush, the IRS will be downsized and made less intrusive. IRS rules should be understandable by all, enforced by few, with low-cost compliance.' In response, fomer IRS Commissioner, Shelden S Cohen said: 'To say that you want to diminish the IRS is basically to say you want to subsidize cheating ... we're not getting the cheating and the chiselers ... [this] is serious.. It affects people's view of the law. The law is what Congress is willing to enforce, not what's on the books. How many people pass yellow lights? They pass yellow lights because police don't enforce yellow lights.' An IRS aide also commented: 'The IRS is always one of the favored agencies for conservatives to hit on.'
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