| Kali Prasad |
Posted
on 30-May-01 10:21 AM
> May 30, 2001
>
> RECKONINGS
>
> Bad Heir Day
>
> By PAUL KRUGMAN
>
> here's a scene in the 1966 British
> comedy "The Wrong Box" in which the
> son of an irascible plutocrat pushes his
> father's wheelchair along the top of a cliff,
> responding with a dutiful "Yes, father" to each
> outpouring of verbal abuse. Then the old man
> waves his hand at the industrial landscape
> below, and declares, "When I'm gone, all this will be yours." "Yes, father," replies
> the son - and pushes him off the cliff.
>
> That scene came back to me as I delved further into the absurd piece of tax
> legislation that a House-Senate conference devised and that George W. Bush
> triumphantly signed last weekend. The Bush tax plan was always peculiar: in order
> to hide the true budget impact, its authors delayed many of the biggest tax cuts until
> late into the 10-year planning period; repeal of the estate tax, in particular, was put
> off to 2010. But even that left the books insufficiently cooked, so last week the
> conferees added a "sunset" clause, officially causing the whole bill to expire, and tax
> rates to bounce back to 2000 levels, at the beginning of 2011.
>
> So in the law as now written, heirs to great wealth face the following situation: If
> your ailing mother passes away on Dec. 30, 2010, you inherit her estate tax-free.
> But if she makes it to Jan. 1, 2011, half the estate will be taxed away. That creates
> some interesting incentives. Maybe they should have called it the Throw Momma
> From the Train Act of 2001.
>
> That's by no means the only weird element in the tax bill. Almost as bizarre is the
> sudden tax increase for upper-middle-income families scheduled for the end of
> 2004. Anyone who has been following the tax debate - in particular via the
> extremely informative Web site of the Center on Budget and Policy Priorities -
> knows that the alternative minimum tax is a major land mine lurking in the road
> ahead. Under the tax bill just passed, the number of taxpayers subject to this tax will
> balloon from 1.5 million to more than 36 million, with the result that many people -
> typically well-off but not rich families who already pay high state and local taxes -
> will find the tax cut they thought they were getting snatched away.
>
> So why not fix the law? Because that would raise the budget impact of the tax cut
> by hundreds of billions of dollars. Still, the conferees felt they had to do something;
> so they included a partial fix for the A.M.T. problem. But even that partial fix, if
> maintained over the whole decade, would have made the tax cut too big to fit the
> budget resolution. So guess what? The A.M.T. fix is scheduled to expire in 2004,
> which means that according to the law millions of families will face a sudden large
> tax increase.
>
> In short, the tax bill is a joke. But if the administration has its way, the joke is on us.
> For the bill is absurd by design. The administration, knowing that its tax cut wouldn't
> fit into any responsible budget, pushed through a bill that contains the things it
> wanted most - big tax cuts for the very, very rich - and used whatever
> accounting gimmicks it could find to make the overall budget impact seem smaller
> than it is. The idea is that when the absurdities become apparent - when mobs of
> angry junior vice presidents from New Jersey start demonstrating against the
> A.M.T., or when elderly multimillionaires develop a suspiciously high rate of fatal
> accidents - Congress will always respond with further tax cuts. And if the result of
> all those tax cuts is to prevent the government from ever providing the things Mr.
> Bush promised during the campaign, like prescription drug coverage under
> Medicare or increased aid to education - well, that was also part of the plan.
>
> Someday, responsible politicians - or is that an oxymoron? - will have to
> untangle this mess. And yes, that means that some of the tax cuts Congress just
> approved will have to be rescinded. (How about a deal that fixes the A.M.T. and
> pays for the fix by returning tax rates on the top bracket to their 2000 level? Just a
> thought.)
>
> But for now, it's a defensive game. The administration, having successfully rammed
> through a ridiculous tax bill, will try to bamboozle us on other matters. So the next
> question is whether men of honor will insist on honest accounting when it comes to
> Social Security reform. Yes, Senator Moynihan, this means you
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