Bush Would Revisit "Voodoo Economics"
WASHINGTON -- His father had a term that could be applied to Jeb Bush's tax plan: "voodoo economics," the unproven notion that massive tax cuts for the rich will spur enough economic growth to justify the budgetary hit.
But there's an even-more fundamental question underlying Jeb Bush's proposal to cut taxes by -- depending on how much voodoo you practice -- between $1.2 trillion and $3.7 trillion over 10 years: Why?
What in the country's current budgetary state suggests that Americans are taxed too much, and to such a degree as to justify the increased deficits or painful spending cuts that would ensue?
Recall that Mitt Romney's tax proposal, to cut individual tax rates without losing revenue or making the code less progressive, was fanciful, but it was at least based on the notion that the change would be revenue neutral -- that is, enough deductions and credits would be curtailed to offset the loss created by lowering rates.
To put the magnitude of Bush's proposed cuts into some perspective, it would -- even under the kindest, most voodoo-y interpretation -- reduce overall federal revenue by 3 percent over the decade.
And, by the way, history and responsible economic modeling (the Treasury Department, the Joint Committee on Taxation) offer little basis for crediting the rosy scenarios, the rosiest of which ladles in a dollop of regulatory relief to jack up the promised growth rates. But the Committee for a Responsible Federal Budget, analyzing the Bush plan under ordinary, static budget rules, says it would drain 8 percent of revenue over the following decade.
To start, though, I interrupt this critique with some words of praise:
First, in this appallingly substance-free campaign, that Bush has a detailed tax reform plan at all, unlike most opponents.
Second, that some of his policies compassionately and smartly enlist the tax code to help low-income workers, expanding the earned income tax credit for those without children and nearly doubling the standard deduction, thereby reducing the number of households who owe any income tax. So much for Romney's lament about the 47 percent who don't pay taxes.
Third, that Bush takes some aim at unwarranted tax breaks for the wealthy. He would eliminate the carried-interest loophole that lets hedge-fund managers pay much lower rates, although the significance of this change is more symbolic than budgetary. He would cap most itemized deductions at 2 percent of income.
I don't quarrel with the fundamental instincts of Bush's plan -- to broaden the tax base by eliminating or trimming deductions and credits. Of course that makes sense with our current monster of a tax code. And making the system fairer, more rational and easier to navigate would benefit not only individuals but the economy at large.
Nor is there anything inherently wrong with the kind of dynamic scoring Bush employs to disguise the size of his cuts. As former Congressional Budget Office Director Douglas Elmendorf explains in a new paper, including such feedback effects for major legislation like tax cuts would improve accuracy and "provide important information" about economic effects.
But I return to the fundamental question: Why is a gigantic tax cut warranted -- another gigantic tax cut, on top of what Bush's brother oversaw when there were supposed budgetary surpluses?
Notably, the Bush 43 tax cuts pale in comparison to what Jeb Bush proposes; they amounted to 5 percent of total expected revenue. The Bush 43 cuts came at a time when reputable economists fretted over paying down the debt too fast. Now, debt levels have soared to a dangerous share of the economy.
Are Americans overtaxed? Not compared to other industrialized countries. In total tax burden, state and federal, in 2012, the United States ranked 32nd out of 34 among the members of the Organization for Economic Cooperation and Development.
And not overtaxed compared to previous levels. Effective federal tax rates are near historical lows, according to the CBO. The average effective tax rate was 17.6 percent in 2011, compared to 22 percent in 1979. The 2013 fiscal cliff deal increased tax burdens for the wealthiest Americans, but the basic truth remains.
The Bush campaign argues that tax cuts are warranted to jump-start an anemic economic recovery and that the resulting hole will be filled by other pro-growth changes and spending cuts, particularly in entitlement programs. But given the nation's precarious fiscal state, it makes scant sense to devote trillions to tax cuts justified by neither history nor logic.
(c) 2015, Washington Post Writers Group