Tax Reform Timidity

Unfortunately it will get seriously modified. When even GOP Senators are getting the willys, then there's a problem. It's a great idea, but with Bush focusing on the war in Iraq, attention and political capital will not be spent to get the plan passed "as is."

The dividend cut is a very little "pop".

I've watched the Congressional tax writing committees professionally for 20-odd years now. (And if you want a group that would make Bismark's sausage makers blanch, that's them.) My impression is that Bush isn't really doing anything serious at all on taxes this year, or even on the budget generally. And with good reason -- he's preparing for a war, and that really is much more important and more time sensitive too, so first things first.

Of course, the Administration has to propose *something* on taxes each year as a political necessity, and for Republicans that means a proposal to cut something. They ran down the list of usual suspects like a capital gains cut and dismissed them for political reasons. Then they got to Hubbard's old proposal for dividend tax reform and decided that looked good on the economics and poltically too -- because marginal voters these days tend to be investors and an extra deduction on the tax return for them from Republicans is a nice thing to have in their memories on election day.

But there's no evidence that Bush is doing any leaning on anybody in Congress at all to get what he wants through. And a President who really wants to get something through Congress *always* has to do some serious leaning on key Congresspeople to get it, because otherwise they show an insitutional mind of their own.

IOW, this year's tax proposals are just a part of the political "permanent campaign" we now all enjoy. If the war goes well, next year the Bush people may get serious on fiscal policy with Congress. If it doesn't, they'll have other concerns next year too.