After seriously overcharging taxpayers, Washington is finally refunding part of the money. Starting this month, as a result of recently-enacted tax cuts, workers’ take-home pay will increase by one percent. Additionally, taxpayers will receive a check some time between this month and October 1, returning a portion of their income tax “withholding” for this taxable year.
Finally, there’s some good news coming from Washington.
In the coming weeks, income taxpayers will receive a letter from the Internal Revenue Service detailing the size of the “rebate” check. Individuals are eligible for as much as $300, single parents as much as $500 and married couples will receive up to $600. All told, taxpayers will receive as much as $45 billion in tax cuts this year alone – part of the ten-year $1.3 trillion tax cut signed into law by President Bush in June.
This is only the beginning of the tax cut, however. Over the next few years, all income tax brackets will be lowered, the $500-per-child tax credit doubled, and IRA contribution limits greatly increased. Additionally, the so-called “marriage penalty” will be sharply reduced and, by the end of the decade, the estate or “death” tax will be completely eliminated – a key provision that I have long advocated.
The best part of this tax relief is that individual taxpayers are given the freedom to decide how to spend or save more of their own money. And the ripples from this tax cut will eventually benefit more than just the individual taxpayers. For example, giving Americans more money to spend will provide a needed boost to our overall economy, since businesses that sell more of their products to consumers will be able to expand or hire more employees. The repeal of the “death tax” will save many family farms, ranches and small businesses – since imposition of such a high tax on inheritances has meant that many people are forced to sell their property just to pay the bill to Uncle Sam.
Though tax relief is welcome news, it also has its political detractors. Before the ink was even dry on the first tax-relief bill in 20 years, some Washington politicians were scheming on how to take most of it back. They say these tax cuts, which came as a result of intense negotiation and compromise, put Washington spending programs “at risk” and “imperil” our efforts to pay off the federal debt. By the way – does anyone else ever notice that you never hear them worry about the federal debt when it comes to more government spending?
Regardless, their arguments are without merit. As a direct result of decades of overcharging American workers, Washington sits on a large budget surplus. This is money left over after increasing spending by record amounts on important programs such as education and health care, and guaranteeing that Social Security is protected. Moreover, the Congressional Budget Office estimates that, even with the tax cuts, we can continue to pay off the public debt at the fastest rates possible.
The choice, then, was whether to keep this extra money in Washington – where it will be swallowed up by government bureaucracy or unnecessary spending – or to return it to the Americans who earned it in the first place. For me, this was an easy decision.
I always liked the way President Calvin Coolidge put it: “Collecting more taxes than is absolutely necessary is legalized robbery.” Yet for years Washington has imposed on Americans the highest tax burden in history. Tax rates have become so excessive that the average family currently pays nearly 40 cents of every dollar it earns in taxes. This is disgraceful. In the United States, families spend more on taxes than of food, clothing, shelter and education, combined.
Tax relief is long overdue.