Bush's latest tax cuts seal legacy

When President Bush signs his latest round of tax cuts, expected within days, he confirms his place as one of the great tax slashers ever to sit in the White House - alongside names such as Coolidge, Kennedy, and Reagan - just in time for an election.

Others have cut taxes more. President Reagan's 1981 cut was larger than the Bush tax cuts, relative to the size of the economy, but he was forced to backtrack almost immediately. What's remarkable about the Bush record is its consistency. A tax cut every year: in war or peace, with a record surplus, or - as it is this year - with a record deficit.

"Tax cuts will probably be the top element of President Bush's domestic legacy," says John Pitney, a political scientist at Claremont McKenna College in Claremont, Calif. "They will have very lasting effects, because sooner or later Congress will have to deal with the issue of spending restraint."

To date, the Bush tax cuts already enacted have cost the US Treasury $651 billion, including higher interest on the national debt. The Working Families Tax Relief Act of 2004 will cost another $146 billion over 10 years, by congressional estimates. With interest, that takes the Bush tax cuts to $2.2 trillion in the next 10 years, says the Center on Budget and Policy Priorities.

The timing for this highly charged vote was all but set in 2003, when the GOP-controlled Congress opted to phase out the administration's most popular tax breaks - marriage penalty relief, the $1,000 child tax credit, and the expanded 10-percent tax bracket - in a presidential election year. Tax breaks for business or the wealthiest taxpayers have later sunsets.

Moreover, the climate for Round 4 of tax cuts is more constrained than for the first Bush tax cut in 2001, when budget analysts were predicting a $5.6 trillion surplus. Last week, the Congressional Budget Office projected a $3.6 trillion deficit over the next 10 years.

Yet, despite gloomy forecasts, only three US senators - and only one Democrat -voted against the bill. "We are ... faced essentially with a choice between these tax reductions and fiscal responsibility - when, in fact, we could have achieved both," said Sen. Olympia Snowe (R) of Maine, who voted against the latest cuts and successfully held the 2003 tax cut to $350 billion. She was joined in opposition by Sens. Lincoln Chafee (R) of Rhode Island and Ernest Hollings (D) of South Carolina.

For most lawmakers, the risk of voting against popular tax cuts in an election year was too great. It's "one of those election year bills," said Rep. Charles Rangel (D) of New York who voted for the bill, which passed the House 339-65.

"What's at stake for Democrats isn't just individual races, it's the image of the party," says Ross Baker, a political scientist at Rutgers University in New Jersey. "Had the Democrats really mounted opposition to it, it would have played directly in to the president's hands: He could have described the vote as a malicious Democratic move against the middle class - exactly the sort of thing you don't want tagged against you in an election year," he adds.

As pure politics, the Bush tax cuts are a textbook study in how to muscle bills through Congress. "It's unprecedented, the amount of tax-cutting Bush has done: Four tax cuts, four years in a row," says Chris Edwards of the Cato Institute.

A key to the Bush success: Close coordination with business and conservative groups and allies on the Hill. In addition to controlling both the House and Senate, the Bush team and conservative activists rallied the business community around annual tax cuts, even in years when business tax breaks were not included. Some business groups opposed the 1981 Reagan tax cuts, because cuts for them were not included. It's a pattern that conservatives scrambled to avoid in the Bush years.

"The goal in the first year was pro-family tax cuts and rate reduction. Business said, 'There's nothing in it for us.' We said, 'Wait until next year... Don't ever think you have to push someone off the train to make place for yourself, because there is another coming down the track," says Grover Norquist, president of Americans for Tax Reform. He organized a business working group, including major trade associations, to lobby for the Bush tax cuts.

If Republicans pick up two Senate seats, "We will be able to make the death tax cut permanent," he adds, referring to the elimination of estate taxes. Other conservative goals in a second Bush term include reducing the capital gains tax, ending "double taxation" of dividend income, and moving toward a flat tax. Another big priority in the second term: cutting government spending. "It's a huge issue for us."

GOP leaders on the Hill say their priorities are jobs and the war on terrorism. The tax cuts help revive the economy, they say.

But many economists say that making the Bush tax cuts permanent would reduce, not increase, the size of the economy in the long term. The problem is "the deficits tomorrow and in coming years when the babyboomers are retiring," says Joel Friedman, senior fellow at the Center on Budget and Policy Priorities. "The very people getting a few hundred dollars [in tax relief] now, in a few years will find they are paying for it more directly, as they face substantial fee increases" or program cuts.