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The Tax-Cut Sideshow

As the president and both houses of Congress move toward final negotiations on a tax-cut bill, let's not forget that this ought to be a sideshow. The main event is a balanced budget plan that has some hope of extending fiscal responsibility well into the next century.

That overriding goal has never been well served by a tax-cutting derby. But tax cutting is on a bipartisan roll of sorts, and the chief concern has to be selecting those reductions least likely to balloon future deficits and most likely to serve the ends of social justice and economic growth.

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Those criteria argue for making the $500 per child tax credit available to a wider range of low-income Americans. While their federal income-tax liability may be minimal, they pay substantial amounts in Social Security and payroll taxes, and their economic need is clear. The administration is right to push for greater eligibility.

Arguments of equity also figure in the capital-gains arena. Tax breaks on the sale of assets unquestionably benefit the wealthy disproportionately. But such reductions also reward investment and stimulate economic activity. And with millions of middle-income Americans owning stock - as well as owning a home - capital-gains reductions bring smiles not just to the very well-off. But indexing capital-gains taxes to inflation in future years, as the House proposes, goes too far. That proposal would help bust a balanced budget and should be jettisoned.

The college tuition tax credits should help the nation make a crucial investment in education. The proposed reduction in the inheritance tax is positive, particularly as applied to family-owned businesses and farms.

All these elements have to mesh with tough decisions on the spending side. Last week's bipartisan move toward reining in Medicare was laudable. We hope there's more to come.

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