Here are the results of President Bush's tax cuts: Middle-income Americans received an average tax break of less than $750 while those making more than $1-million per year enjoyed an average tax cut of about $120,000, increasing income inequality to record levels. And contrary to Bush's claims, the tax cuts didn't raise sufficient revenue to pay for themselves.
The next president will have to deal with the fallout. Tax cuts, an expansion of the federal government and the $11-billion per month spent on the wars in Iraq and Afghanistan have contributed to nearly doubling the size of the national debt. It is fast approaching $11-trillion. The budget surplus Bush inherited nearly eight years ago has turned into a deficit of about $700-billion, or a staggering 5 percent of the nation's economic activity. Now the economic crisis has tacked on the $700-billion bailout and probably will require additional deficit spending to return confidence and job growth to the economy.
The next president will have to plan sensibly, prudently invest tax dollars in ways that will directly stimulate a recovery and make the tax code more progressive. While both Sens. John McCain and Barack Obama would have to adjust their proposals to better reflect reality, Obama offers a better starting point. McCain's insistence on making all of Bush's tax cuts permanent and adding more while promising to balance the budget in four years is a fantasy.
The Arizona senator offered more straight talk in the past. In 2001, McCain courageously voted against Bush's tax cuts, saying, "I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle-class Americans." Now as the Republican nominee, he wants to make the tax cuts permanent, reduce corporate income tax rates, permanently extend the alternative minimum tax patch that keeps most families with incomes under $200,000 from paying it, increase dependent deductions and allow quicker deductions by businesses for investments in capital equipment.
According to the nonpartisan Tax Policy Center, McCain's tax proposals would result in tax revenues declining by $4.2-trillion over the next 10 years, with the benefits flowing primarily to "those with very high incomes."
In contrast, Obama 's tax cut plan offers "much larger tax breaks to low-and middle-income taxpayers," according to the center. Still, it would cost the U.S. Treasury $2.9-trillion over 10 years.
Obama would make permanent only those parts of Bush's tax cuts that essentially benefit taxpayers with incomes under $250,000, and he would increase the maximum tax rate on capital gains. To ease the tax burden on the middle class, Obama would extend the AMT patch and offer new targeted tax breaks to workers, savers, students and retirees, among others.
Both candidates, so full of tax-cut promises, have refused to fully acknowledge that some of their plans would have to be shelved in the face of tough fiscal realities. During the second debate with moderator Tom Brokaw, McCain said there was no need to prioritize his objectives as president. At least Obama was courageous enough to use the "S" word ("sacrifice") in his closing statement of the last debate, though with no specifics attached.
The presidential candidates offer voters what commentator Mark Shields calls the hot fudge sundae diet - eat all you want and lose weight. But on balance, what McCain is selling would be far more damaging to the nation's long-term fiscal health and Obama's proposals would be more progressive.
This is the second in a series of editorials on key issues in the 2008 presidential election.