In the September 2000 issue, I identified six debate points the Republicans should use in selling an across the board reduction in marginal income tax rates. All of them remain valid for President Bush’s plan that now faces a difficult challenge in the U. S. Senate, but I would now add another point and re-emphasize two that have been used only sparingly. My added point is that tax cuts in a dynamic economy do not have a cost that can be identified in linear terms by a static behavior model, so we should not think in terms of the size of a tax rate cut in absolute dollars, $1.6 billion or any other number, which is essentially meaningless. Two points that bear repeating: (1) the Reagan tax cuts were not the cause of the enormous deficits of the late 1980’s and early 1990’s, but were, in fact, the primary impetus for a seventeen-year economic boom, and (2) if there is a real budget surplus, it is because of an overpayment of taxes and there are only two things government can do with it – spend it or refund it; history shows that public debt reduction is not a “tax cut” in the form of lower interest costs.
The most compelling economic lesson of the century just past is that there is a clear correlation between the degree of economic freedom and the rate of economic development. Bush’s proposed tax cut is much smaller, percentage-wise, than Kennedy’s in 1962. If anything, we need to be bolder.