HARD-CORE supply-siders are being most petulant about the tax bill that the administration and Republican Senate leaders are trying hard to push through Congress. This is not only unhelpful to the president, who has done so much to dignify their theories, but downright ungrateful as well.
What the supply-siders don't seem to recognize-- or at least to admit publicly--is that the package of tax reforms and minor tax increases being proposed is not only a sensible measure in itself, but a life-saver for the massive third-year tax cut that the supply- siders have defended so stoutly. Those who call the three-year, $99 billion tax package "the largest tax increase in history" are talking simple nonsense.
Even if the entire tax package now being considered by a Senate-House conference passes, the country will still experience a massive tax cut next year. That's because the proposed excise tax increases, loophole closings and rollbacks in business tax breaks are dwarfed by the enormous reductions made a year ago.
Next year, for example, individual and business taxes are scheduled to drop by $90 billion on top of this year's $38 billion cut. The new tax bill would take back a mere $11 billion of that reduction, in addition to cracking down on people who cheat on their legally owed taxes. Between 1982 and 1985, last year's tax law would reduce taxes by $444 billion. The new tax bill would shave that a bit to a still massive $377 billion reduction in the federal tax bill. Some tax increase.
The supply-siders should also be heartened by the fact that the proposed revenue increases are totally different in structure from the tax cuts they promoted so successfully. Last year, the administration was emphasizing cuts in personal tax rates, hoping to encourage work and saving. Those rate cuts are still in place. This year's personal tax increases are primarily aimed at consumption. If they affect anything it will not be supply, but--if you will pardon the expression--demand. In any case, whatever effect the new taxes have on economic activity is likely to be swamped by the tax increases that states and localities are being forced to impose because of cuts in federal aid and the economic downturn.
Even the proposed scaling back of business tax cuts should not concern the supply-siders. None of the retrenchments affects the original concessions sought by the administration--only some of the more egregious excesses added in the madness that seized Congress in the final days of last year's tax markup.
Having won so much last year, the supply-siders should now have the grace and common sense to help the president cope with a real problem that the nation faces--the prospect of what could truly be the most damaging deficits in history.