THE WAY the Reagan economic program is shaping up as it moves through Congress, there is something in it for everyone, though not necessarily something that everyone would want. For the poor, there are budget cuts, while for the rich, there are tax cuts -- and for those between there are smaller tax increases than there would otherwise have been. The program, of course, with its emphasis on stimulating investment and work effort among society's most productive members, always had this tilt. Compromises to secure the program's enactment, however, are giving that tilt an increasingly sharp angle -- one that would be especially difficult to correct with the inflation-indexed tax system voted by the Senate on Thursday.
The administration, for example, started out with a simple across-the-board cut in individual income tax rates. Whether the structure and timing of the rate cuts were the right ones can be debated, but the merit of simplicity cannot. Early compromises with the Senate added a sharp reduction in maximum tax rates on unearned income, a resulting hefty decline in the already low capital gains tax, a nice break for well-off people living abroad and the phase-in of a multi-billion cut in estate taxes.
Later on came the "all savers" certificate -- a windfall for upper-bracket people who move their savings to banks and expense of their investments in stocks and bonds -- and a few more breaks for oil investors and stock option recipients. Now the House Ways and Means Committee is busy adding sweeteners for the oil interests, commodity speculators and the inheritors of really big estates.
Each of these provisions is stoutly defended by some special group as being essential -- if not to the general reinvigoration of the economy, then at least to the maintenance of its own stake in that revival. Consider, for example, the massive estate tax rollback. The vocal constituency on this one is not the Mellons or the Motts but the defenders of family farms and businesses. The claim is that estate taxes levied on these inflation-swollen assets are forcing heirs to sell them to pay the tax. Never mind that the tax code already provides very favorable treatment for farms and closely held businesses, or that the Senate's proposed increase in the estate tax exemption to $600,000 is almost twice that needed to compensate for inflation since World War II, or that the Ways and Means cut in the maximum estate tax rate benefits only the very, very wealthy. What better excuse for wiping out this barrier to wealth accumulation than the preservation of those ancient fixtures in the American dream, the small farm and the little business?
However you feel about the near wipeout of the estate tax in itself, it should also be viewed as one more of a growing number of special tax breaks that benefit, either primarily or exclusively, the well-to-do. Yes, the rich save more of their income, but, like everyone else, they still spend the big bulk of what they get and generally have a very good time doing it. Each one of these frills, moreover, adds to the already huge complexity of the tax code while providing little if any stimulus to additional saving. Moreover, if, as the Senate has now voted, automatic indexing for future inflation is built into the tax system, the opportunity for using future tax surpluses to buy out preferences or restore lost benefits on the budget side will be greatly reduced.
A billion for this tax break or a billion or two for that one may not sound like much to worry about in what will be by 1984 a $150-billion-a-year tax cut. Remember, however, that a billion not spent on a tax break could protect school lunches and other child nutrition programs from erosion, or shield a million poor old people from a loss in Social Security income, or provide jobs and training for several hundred thousand low-income youths. These are the choices implicit in the budget and tax bills now steaming through Congress.