Eating their lunch
Published: Saturday, January 11, 2003 at 6:01 a.m.
Last Modified: Friday, January 10, 2003 at 10:32 p.m.
It was a no-brainer for George W. Bush to propose his $674 billion "growth and jobs" tax-cut package.
No, it won't stimulate the sluggish economy, not any more than his previous $1.35 trillion tax cut did.
And, yes, it will reward the wealthy - Bush's biggest campaign finance supporters - without doing much to help middle-class and below Americans.
But it's also a no-painer for the president. With a deficit of a quarter-trillion dollars, and a national debt of $6.4 trillion (growing by $1.3 billion a day), Bush and the Republican Congress only have to keep on borrowing to pay for the president's coming war against Iraq and other administration priorities.
And if history is any indicator, the deficit chickens won't come home to roost until Bush is safely into his second term, or out of office altogether.
Borrow and spend (and cut taxes). Borrow and spend (and cut taxes).
They can do that in the Washington Swamp 'till the cows come home.
So in that regard, the appalling thing about the president's tax-cut proposal is not just that it's a sham or that won't do what it's supposed to do or that will only drive American taxpayers ever deeper into debt.
The added travesty is that Bush intends to score political points at the expense of already struggling state and local governments that do not have the Washington's advantage of being able to print more money as needed.
Bush's proposed elimination of federal taxes on stock dividends hurts the locals in two ways.
First, it will take money away from the majority of states that impose a personal income tax. Those state laws tend to "track," federal income tax laws; meaning that if the feds don't tax dividends, the states can't either.
But what about the rest of the states, including Florida, that don't have a personal income tax?
They get hit, too, because if stock dividends are tax free they become competitive with - and perhaps even more attractive than - tax-free government bonds. The sort of bonds that the city of Gainesville uses to finance utility improvements, and the School Board uses to build and renovate schools and the county uses to build public facilities and the state uses to buy endangered lands.
"Eliminating taxes on dividends would reduce the preference of municipal bonds, which cities rely on, and would reduce revenues in the 44 states whose taxes are tied to the federal system," argues John DeStefano, president of the National League of Cities. The plan, adds California Treasurer Phil Angelides, will drive investors "away from bonds that broadly benefit the public at a time when we have enormous infrastructure needs."
"It's another loss of revenues for the cities," Susan Gaffney of the Government Finance Officers Association told The New York Times this week. "There don't seem to be a lot of provisions that address the needs of state and local government."
That's an understatement. In order to finance its war against terrorism, the administration has already signaled its intention to cut domestic spending to the tune of $10 billion this year - cuts that will badly hurt cities, counties, school districts and states.
And even as Bush spends more and more money to beef up domestic security at the federal level, cities and counties - whose police and firefighters form the first line of defense against terrorist strikes - are already complaining about getting little or no help from Washington.
And now President Bush proposes to fatten his own political prospects by literally eating the lunch of states, cities, counties and school districts that depend on dividend taxes and tax-free government bonds to do everything from hire teachers and police officers to build roads to construct schools to provide public utilities.
President Bush to the locals: Drop dead.
Will Congress let Bush get away with it? We hope not.
Especially at a time when states, including Florida, and cities and counties, including Gainesville and Alachua County, are facing what the national Center on Budget and Policy Priorities calls the largest revenue shortfalls in half a century.
Bush may well be able to cut taxes and borrow and spend himself into a second term. His political cousins at the state and local levels don't have that luxury.
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