WASHINGTON, D.C.- With Congress and the Administration locked in battle over whether or not to cut taxes, speakers at a National Center for Policy Analysis (NCPA) Capitol Hill Briefing today called for bolder cuts than those currently being considered by either congressional budget resolution or President Clinton.
As CBO budget surplus predictions stretch toward $63 billion and Americans continue to pay historically high peacetime tax rates, public policy experts urged tax cuts to correct the unprecedented increase in the tax burden under the Clinton Administration.
"Since President Clinton took office in the first quarter of 1993, federal revenues as a percent of Gross Domestic Product have risen almost continuously from 19.2 percent to 21.5 percent by the fourth quarter of 1997," said Pete du Pont, policy chairman of the National Center for Policy Analysis.
"With GDP currently at $8 trillion, this is equivalent to a tax increase of $8 billion every three months for the last five years, or roughly $1,558 per person or $6,230 for a family of four," du Pont said. "With individual income taxes at $737.5 billion for the fiscal year of 1997, per Department of Commerce numbers, we could have cut individual income tax rates by 23.3 percent last year. Now that we have a budget surplus rather than a deficit, there is no budgetary reason why taxes cannot be cut," du Pont concluded.
Jack Kemp, Empower America co-director, said, "If Ronald Reagan could cut tax rates dramatically across the board, with deficits looming as far as the eye could see, why can't a Republican Congress cut tax rates across the board today with surpluses looming as far as the eye can see?"
"The time has come for Washington to stop ignoring the facts and hoarding budget surpluses for their own political agendas," Kemp said. "Instead, we must move into the 21st Century riding high on the effects of broad- based, across-the board tax rate reductions for all Americans and overhauling Social Security with private retirement accounts for all workers and families."
Speakers assessed tax cut options currently being considered by Congress, including deducting FICA from income taxes, eliminating the marriage penalty, changing the income tax brackets, and eliminating the estate tax.
James Carter, economic and budget counsel to Senator John Ashcroft, proposed that employees' FICA payroll deductions, which currently finance Social Security benefits, be included as standard deductions on workers' personal income tax returns.
Bruce Bartlett, senior fellow for the National Center for Policy Analysis, discussed the range of possibilities in eliminating or reducing the marriage penalty. A marriage penalty exists when two-earner married couples with roughly equivalent salaries pay more federal income tax than they would pay if each spouse were taxed on his or her individual income.
"Although there is general agreement on the goal of eliminating the marriage penalty, there is none on the means," Bartlett said. "Initially, there was strong support for simply allowing couples to file jointly or singly, whichever way they came out ahead. This method, proposed by Reps. Jerry Weller and David McIntosh, would reduce federal revenue by $29 billion per year and would require couples to do their taxes three times to see which way they pay less taxes. It also poses the problem of dividing joint investments and deductions like home mortgage interest accruing to both spouses," Bartlett said.
Stephen Moore, director of fiscal policy for the Cato Institute, proposed changing the income tax brackets. "In the past three years, federal income tax receipts have been rising at almost twice the pace of wages and salaries. As a result, 38 percent of the taxpayers are pushed into higher brackets, resulting in the ultimate invisible tax increase," he said. The solution, according to Moore, is to expand the income threshold for the 15 percent tax bracket to apply to most middle income families, adjusting the tax brackets for inflation and real income growth to prevent future bracket creep."
Governor du Pont concluded, "It's time for the American public to supervise the spending of their hard-earned wages, rather than allowing the government to continue to over-tax and over-supervise."