I don't quite "get" the president's new economic package. I dare say you don't either, but that's another matter.
I get part of it, of course. I understand the argument that collecting an income tax on dividends amounts to double taxation. The company you're invested in pays income tax on its profits and then, when those profits are distributed to shareholders as dividends, they're taxed again.
Unfair? Perhaps. But is it different from the government's taxing your employer for the profit he makes during a particularly good year and then taxing the bonus he gives you for helping produce those profits? I could be swayed in either direction -- but that's not the part that's bothering me. What I don't get is how this helps the still-staggering American economy.
Fortunately, the president has a wonderful opportunity to explain it to me. Bloomberg News looked at George W. Bush's 2001 tax returns and calculated that under the new proposals the Bushes would have saved about $44,500.
Why doesn't he tell us what economy-stimulating thing he would do with that money? Then maybe I'd understand how the whole package of breaks he proposes for the richest Americans would help the rest of us.
I don't want to be unfair. When the president said last week that his bill would "put $70 billion to work in the private economy over the next 18 months," he also said there would be a tax savings of about $1,100 for an average family of four.
I know what would happen in the average family that illustration is calculated to bring to our minds. They'd spend the money. Low- and moderate-income people usually manage to spend pretty much whatever they get their hands on.
Indeed, if the plan is to get money into the hands of people who will spend it, thus stimulating the economy, then it's a piece of cake to know what to do: Give it to poor and lower-middle-class folks. But maybe the plan is to get money into the hands of people who will invest it in companies that would expand and hire and stimulate the economy that way.
My sense, though, is that the investments the president's rich pals make are based on expected return. So to the extent that making dividends tax-free would influence their investments at all, wouldn't it simply shift the investments from stocks that don't pay dividends -- and maybe from tax-free municipal bonds as well? And how, precisely, would that help the economy?
You see, I'm trying to get this thing down to numbers I can understand. Calling it a $670 billion economic stimulus package conjures up no pictures in my non-economist brain. But I understand the White House projection that the proposal would save a $40,000-a-year couple with one child about $732 (mostly, I gather, through an expanded child credit). Will people in this lowly category be getting a break because of its anticipated impact on the economy -- or is it designed only to get the Democrats to shut up about the breaks going to the super-rich?
I'll tell you the truth. It seems to me Bush is one of those people who like tax cuts just because they like tax cuts. They change their justification for the cuts when the economic facts change, but they never change their fondness for the cuts. Bush's first tax-cut measure, if you recall, was proposed as a way of redistributing the huge budget surplus he inherited from Bill Clinton. You know, give the people their money back.
When the surplus evaporated (I won't get into whose fault that was), he proposed tax cuts as a way to stop the economy from deteriorating. Now he's proposing tax cuts as a way to turn the economy around. Does he really believe tax cuts can, like penicillin, find their healing way to wherever the infection happens to be? Or do he and his fellow cutters think tax-cutting is the most appropriate way to shrink the size of a government they excoriate as too big and too intrusive (except when they want a government that can pry into our computers and mail and spending habits)?
Most of the aforementioned intrusions, of course, are justified as part of the war against terrorism -- which gets me wondering how cutting taxes at precisely the time we're dramatically increasing spending for domestic security and a war against Iraq doesn't put us into a major fiscal deficit.
But I understand the president is a busy man who doesn't have time to walk me through all this stuff. That's why I'm willing to settle for something simpler: his explanation of what he would do with his $44,500 and how that would help the economy.
He could call it "Cutting Taxes for Dummies."