BACK • 
Surpluses Represent Overtaxation
In the beginning, the then candidate, George W. Bush, proposed a 1.6 trillion-dollar tax cut over the next 10 years. Predictably, the Democrats, interested always in keeping all money under the control of Washington so that it can be used for special groups and pandering for votes, said, 'Oh, no, that kind of a tax cut is way too much. It can't be across the board, it must be targeted to just the right kind of people.' That was in the pre-election days when the Clinton administration was still selling the baloney that the economy was just fine. Even the Republicans gasped a little bit, and thought maybe the size of the tax cut being proposed was a little large.
Well, as it turns out, the new President and his advisors were right on the money about the economy. We were, in the third and fourth quarter of last year, in a lot more trouble than the administration led us to believe. Things weren't just fine but were crumbling underneath the surface. What a difference a few months and a few bad economic statistics make.
Now the whole world has turned around. It isn't "if" we need a tax cut, it's "when" we're going to get it. And even the size now isn't being much debated. It's going to be big, and probably right around the 1.5 trillion dollar mark, and is good not only for savers and investors, but for citizens everywhere. If there were any doubts about the need for a big tax cut, two very recent events should put that debate to bed once and for all.
First of all, the Fed Chairman, just a couple of days before cutting interest rates by a half point for the second time in a month (what, me worry?) indicated publicly for the first time that he had no quarrel with the administration's tax cuts. As a matter of fact, what Greenspan said was really a wonderful surprise to those of us who believe that federal surpluses represent nothing more than overtaxation. Greenspan indicated that there would be no fight between the Federal Reserve and the administration over tax cuts. He said that tax cuts and lower interest rates can live together. The Fed Chairman noted that the tax cut is not even huge by tax cut standards, but about average in size. Greenspan said he preferred tax cuts to new federal programs, which broke all Democrats' hearts, and he said tax cuts should not be targeted, but be across the board. In short, Greenspan conceded the economy needs all the help it can get, and he was ready to do his part to see that it happen.
The second big event was the Congressional Budget Office upping its estimate of tax surpluses over the next ten years from the previous whopping number of 4.3 trillion dollars to 5.2 trillion dollars.
Two things must be noted here. First of all, we are paying unusually high taxes right now, and anybody who tells you otherwise is not paying attention to history. Over the last 50 years the tax rate in this country has averaged 16% to 17% of Gross Domestic Product. Currently, the tax rate in this country is 21% to 22% of Gross Domestic Product. So, rates are historically high. The other thing that the "keep the money in Washington" crowd is claiming is that you can't make accurate projections on surpluses out in ten years. Perhaps you can't. But the administration and the Congressional Budget Office estimates are based on only delivering 3% growth over that 10 years in the Gross Domestic Product. By most standards, that is a most modest estimate and should be readily achievable.
One of the things not understood by many when discussing the tax cuts is the overall good it will do for the economy. When you reduce taxes, you encourage people to save and invest, and you encourage entrepreneurs to take risks. The tax reductions in the early 80s under President Reagan planted the seeds for the economic boom we enjoyed for much of the 90s. That needs to be continued, and that may be the biggest long-term benefit to the upcoming tax cuts.
In the meantime, at the bottom line, we can afford the tax cuts. Some of that money should come back to "we, the people." Washington just wants to keep it there because they think they know better how to spend your money, that is, your taxes, than you do. What do you think?
(Tom Butenhoff is a First Vice President with J. E. Liss and Company, Inc.
in Milwaukee. The views are his, and not necessarily those of Liss
Financial Services or the Job Connection/Hiring
Network.)