DeLay Plans to Hike the Bush Tax Cut

Thank God for Tom DeLay (R.-Tex.). What a relief that the top strategic thinker on Capitol Hill is a conservative and in a position to put his policies in play. The House majority leader may have more horse sense than all the Senate Republicans rolled together. DeLay’s response to the $670-billion Bush tax cut was unequivocal: “We regard this as a floor, not a ceiling, on tax cuts this year.” Not all Republicans share DeLay’s tax cut enthusiasm. In the few weeks since President Bush announced his bold, ambitious, and economically sensible economic growth tax cut plan, many of the so-called moderate Republicans in the Senate began heading for the hills. The Daschle Democrats had hardly fired a shot before the John McCains and Lincoln Chafees had thrown up their hands and cried, “No mas.” Other Republican senators, known for planting themselves in the middle of the road, began to hint that the Bush tax plan was too big, or too tilted to the rich, or would blow too big a hole in the budget deficit. Falling into this camp were the two Ohio senators, Mike DeWine and George Voinovich. Susan Collins, the moderate Republican from Maine, told the New York Times that the price tag for Bush’s plan “may be too big” given the impending war with Iraq and other spending needs. Will someone please tell these RINOs (Republicans in Name Only) in the Senate that Bush is winning this fight. Bush’s plan has the Democrats twisted into the shape of a pretzel as they try to fall back on their standard but weary class warfare rhetoric. The mass appeal of that message went out of style with bell-bottom blue jeans and Bee Gees music. There’s a good reason Ted Kennedy and Tom Daschle started to nearly hyper-ventilate when Bush announced his political masterstroke tax plan: They know that if this plan passes, the Seven Democratic Dwarfs who are running for President haven’t a prayer of carrying more than a half-dozen states. Vice President Dick Cheney was right on message when he told Larry Kudlow on CNBC recently that the 85 million investor shareholders in America will benefit directly and decisively from the plan that eliminates dividend taxes and chops punitive tax rates down to size. Cheney also noted that half of the households that have dividend income are senior citizens—a group that votes in large numbers and no doubt finds the ending of the double-tax on dividends mighty appealing. The Bush plan helped rally the stock market just from its announcement. John Rutledge reckons the Bush plan will add some $500 billion to $1 trillion in valuation to U.S. stocks. This is why conservatives should thank Tom (The Hammer) DeLay for saving the day. DeLay is encouraging his House colleagues not to shrink the Bush proposal, but to increase size. If there’s any man who can make that happen, it’s DeLay, the acting prime minister of the House. As usual, DeLay is three moves ahead of everyone else. He knows that even with a GOP majority, the John McCains of the Senate will work to neuter the Bush plan and thus rob of it of its economic growth incentives. So why not pass something bolder out of the House to make the White House plan the moderate middle position? The Bush plan could benefit from additions. Right now the Bush plan would cut taxes by about 2.5 cents on the dollar. That’s helpful, but why not include even more growth enhancers. If the budget deficit is the hold-up, pass a budget that restrains overall government spending over the next five years to the rate of inflation. That will give us a balanced budget by no later than 2006. DeLay has some strong allies in the House who are already crafting valuable add-on amendments to the Bush plan. They include:

  • Mike Pence (R.-Ind.) and David Dreier (R.-Calif.) have called for reducing the capital gains tax to 10% to increase capital investment and venture capital funding.
  • Mark Kirk (R.-Ill.) is insisting that Congress use “real world scoring” to estimate the revenue growth caused by the tax plan.
  • Chris Cox (R.-Calif.) has a bill immediately and totally repealing estate and gift taxes.
  • Paul Ryan (R.-Wis.) wants expanded IRA accounts to increase household savings.
  • John Shadegg (R.-Ariz.) has called for phasing out the Alternative Minimum Tax over the next 5 -10 years.
  • Each of these measures would pump steroids into the economy and thus enhance the probability that the Bush tax cut will generate strong economic dividends in 2003 and 2004. Perhaps most important of all is the Kirk initiative to abandon static revenue scoring, which produces dreadfully inaccurate results that are used by liberals to attack tax cuts. Republicans now control the House, Senate and the White House. They should not use garbage-in, garbage-out economic models devised in the days of Tip O’Neill and George McGovern. Republicans need to follow Tom DeLay’s strategic lead. Best to grow the tax cut in the House and negotiate with the Senate from a position of strength, not weakness.