Tax Cut Showdown

The New York Times | Editorial

The House of Representatives passed two major tax-cut bills this week. One deserves to become law; the other deserves to die. It will be up to the Senate to make sure that happens.

On Wednesday, the House overwhelmingly passed a bill that would shield millions of taxpayers from the alternative minimum tax next year. The relief is expensive - costing nearly $30 billion - but it's critical. Without it, many middle-class Americans, who were never the intended target for the alternative tax, would be suddenly forced to pay higher taxes when they filed their 2005 tax returns. (The alternative tax was intended to stop rich people with lots of shelters from escaping their tax burden entirely, but it has not been changed to reflect inflation or the tax cuts passed under President Bush.)

The good news ended there. The House irresponsibly neglected to include any offsetting tax increases to help pay for the tax relief. (The Senate's tax bill includes $19 billion in offsetting tax increases.) Even more egregious, the House passed yet another tax bill a day later that would drain the Treasury of $56 billion of additional revenue over the next five years. Of that total, $21 billion would be used to extend, through 2010, special low tax rates for investors' dividends and capital gains. Those rates are set to expire at the end of 2008.

The extension is both unaffordable and gratuitous. Most of the benefits would flow to taxpayers who make more than $1 million a year. That's morally reprehensible at a time when the House and the Senate are moving toward an agreement to cut as much as $45 billion over five years from domestic programs like Medicaid, food stamps, student loans and child-support enforcement. And it comes at a time when the government is already borrowing extensively for all manner of undertakings, like the war in Iraq and the new prescription drug benefit for Medicare.

FULL STORY