The tax cut is pretty interesting - like everything else in Washington it is almost purely political. Republicans bitch that the Democrats cut it from 1.6 to 1.35 billion and the Democrats bitch that it's not the right time to do it.
The major components are the rate reduction and the estate tax. The rate reduction will eventually drop the lowest rate from 15% to 10% and the highest rate from 39.9% to 35%. And it's retroactive. This is why people will be getting up to $300 back at the end of summer.
So how is it political? The GOP is trying to jump start the economy by boosting personal spending. The hope is that the $300 per person rebate will result in strong retail sales at the end of summer which will roll into strong retail sales for Xmas and jump start our laggin economy. It is purely a political move. George knows that the economy is what destroyed his father, remembering that Sr had a 91% approval rating and still lost in '92. We are on the cusp of a recession, although I doubt we will see two consecutive quarters without growth. Stagflation is closing in -- W. needs to do something.
At first the tax cut was met on Wall St with strong skepticism, that is until Greenspan came out and said that he agreed with the cut.
All in all, it's a good thing, I think. The only danger is that we cut taxes and someone like Rumsfield starts spending insane amounts of money on defense and sticks us back in the massive whole Reagan left us in. I doubt that will happen now that Jeffords has swung the power to the Dems.
Personally, if I have a GOP president I want a Dem Congress and vice-versa. It's too scary for either party have control of both. The best thing for this country is centrism.
As for the estate tax, it's broken down into two tiers. The first tier will raise the floor of which estates are taxed -- the second tier, which will take 8 years, will abolish the tax completely.
The estate tax is a very interesting thing by itself. Why does the gov't tax you on property you are passing down? Why do they tax 50% and more?!? Because they can and because the charities in this world will die without an estate tax.
The raising of the floor is a very good move, I'm not sure I agree with a complete abolishment. But we do need a reduction from over 50% it is now. It affects so few americans anyway...
The thing that is disappointing about this tax cut is that there was no reduction of capital gains taxes -- that is where this country needs to change. 20% for short term and 39.9% for long term gains is ridiculous.
