How Big a Tax Cut?
Nearly everyone likes lower taxes, but cutting taxes as much as possible and for as many people as possible may not be a political plus this year.The reason is that many voters would like to allocate prospective budget surpluses to other purposes—strengthening Social Security or Medicare or paying down the federal debt. Furthermore, excessive revenue cuts can be fiscally irresponsible. One way to dress a large tax cut in the garb of fiscal responsibility is to phase it in gradually. A slow phase-in lowers costs during the early years used in computing “long-term” effects of budget changes—five years for the House of Representatives. Bush’s tax plan would cut revenues $483 billion over the first five years, according to his press releases (the campaign has not released revenue estimates beyond five years). But many provisions would not take full effect until after five years. The tax cut for the second five years would be more than $1 trillion. Another way to appear to lower the cost of
