Tax cut pipe dreams

On Saturday, Congress passed the biggest tax cut seen in the last two decades. The plan calls for a tax cut of $1.35 trillion and will spawn immediate rebate checks for taxpayers, which is intended to stimulate the economy. After the rebate checks, the majority of the cuts stem from reductions in personal income tax, the doubling of child credit, reducing and finally repealing the estate tax, elimination of the marriage penalty, and a deduction for college tuition costs among other things. The optimism of the Republicans in passing such a broad tax cut is commendable, yet the possibilities of future deficits should have been taken more seriously. The Republicans could end up regretting the enormity of the tax cut.

The passage was the last achievement of the Republican-dominated Congress. What is monumental about this is both parties’ wishes were at least nominally granted. Those in lower income brackets will receive immediate relief, mainly from rebate checks and the creation of a new bottom tax rate of 10 percent that applies to the first $6,000 a single person earns and the first $12,000 a couple earns. Spanning the next decade, the higher tax brackets will also fall, creating relief for those in the upper income brackets.

When the plan has been played out to its full effect, it is those who are in the middle and upper classes, married with children, who will receive the greatest benefits. This is far from unreasonable, since it is proportional to the amount of taxes paid in. Those who pay more will receive more. Claims have been made that this tax cut unfairly benefits the rich, however, lower income families still do see benefits. Those whose incomes were too low to previously receive child credit will now be eligible and the reduction and eventually elimination of the marriage penalty should leave more money in the pockets of families. Ideally, more money and benefits should have been made available to people with lesser incomes. This budget, which does not totally abandon the poor, does not give them too many reasons to cheer.

Congress should have been more cautious in passing such a rigorous plan, especially since it is based on a projected surplus. Planning the fate of $1.35 trillion before actually seeing the money could come with disastrous effects if future surpluses are smaller than estimated. The projected surplus stands at $5.6 trillion and with the tax cut and money from Social Security and Medicare being set aside for debt reduction there is only $1 trillion left. This is a volatile number; emergencies like war, natural disasters and shortages in resources eat up billions of dollars and lower the available amount of money. This is in addition to Republicans wish lists that include money for military build-ups while Democrats favor money for education and Medicare. That Republicans’ want to return money to the people is not the problem, however, there are no assurances projected surpluses will materialize, which appears to be what this tax cut is running on. The tax cut is spending and giving away money before it has even arrived. In their zeal to give back to the American people, the Republicans may have inadvertently plunged the country into a deficit.