CONGRESS IS POISED to pass a tax bill -- yes, another one -- that is as predictable as it is irresponsible. With the election 42 days away, legislators probably cannot be deterred, but it might be possible to keep the bill from becoming even worse than it is in its current form. The legislation would extend the three "middle-class tax provisions" set to expire next year: the $1,000 child tax credit, the marriage penalty fix and the 10 percent tax bracket. These provisions are expiring because lawmakers, in a gimmick-ridden feint at fiscal responsibility, insisted that the 2003 tax cuts couldn't cost more than $350 billion over 10 years. To keep the ostensible price tag down, lawmakers structured the most popular provisions to run out at the end of this year, knowing they would extend them later.
That dishonesty, in which President Bush was a cheerful partner, was well understood at the time. What was not foreordained was that Congress would so abandon any pretense at fiscal responsibility as to extend the tax cuts without finding any way to pay for them. Congressional leaders had reached a bipartisan agreement before the August recess that at least would have limited the deficit damage by keeping the extension to two years. But the administration killed that deal at the last minute, insisting that wasn't enough and gambling -- a pretty safe bet -- that in an even-numbered year Democrats would cave in to demands for a longer extension. A five-year extension, which Senate Minority Leader Thomas A. Daschle (D-S.D.) -- who's in a tough reelection race -- has already agreed to accept, would cost about $130 billion with a few other goodies thrown in.
Now the price could go even higher. One cynical idea is to have different provisions expire in different years, providing the prospect of a yearly vehicle for even more tax cuts. Another risk is a costly increase in the availability of the child tax credit for those at the upper end of the income scale. There's no justification for such a hike: Well-off families don't need government subsidies to raise their children. In fact, long ago the point of this tax bill was to remedy Congress's failure to include poorer families in the first place. Now poor families get relatively little help from this bill (about $2 billion), and, because of the strange way their child tax credit is structured, with an income threshold that rises with inflation, more and more families are finding themselves ineligible to receive the extra help -- even as their incomes fall. According to an analysis by economists Leonard E. Burman and John Karl Scholz, 4.4 million lower-income households will receive a smaller tax credit -- or none at all -- next year as a result of this glitch.
Even in an election year, Congress ought to be able to do better than a tax bill that adds to the deficit, cuts taxes further for many who don't need the help and leaves those who do deserve help with barely a crumb.