War on Progressive Taxes

President Bush hauled out the heavy artillery Monday, but not against Iraq or North Korea -- indeed, his budget made no mention of how he’ll pay for any actions he may take in those places. Rather his $2.23-trillion spending proposal for 2004 declares war on the idea of a progressive tax code. In slashing taxes while dismissing the importance of deficits, the administration is pushing the most radical change in economic policy since Ronald Reagan, if not the New Deal.

A flat-out retreat from the idea that the Internal Revenue Service should take from the rich at a higher rate than from the poor, the budget contains a two-pronged attack on the progressive tax code that would basically end taxation on investment income. For starters, it would let individuals off the hook for taxes on corporate dividend income.

In addition, Bush has floated the idea of creating “lifetime savings accounts.” A family of four could stash up to $30,000 a year in the accounts, plus $15,000 more in new tax-free retirement savings. But the Americans to whom the government should be giving a break are the ones who worry about stretching their paychecks to cover groceries, auto insurance and rent or mortgage payments, not those who fret about sheltering income from taxes.

As the proposal stands, a corporate attorney could dip into her lifetime savings account to, say, add a sauna to her weight room and still not need to worry about retirement funds. However, a custodian might well deplete his meager savings each time he had to replace a dead refrigerator or the head gasket on his Chevy and could wind up broke at 65.

Bush’s skewed spending priorities only make the situation more exasperating. He wants to shower money on the Pentagon, raising its budget to $380 billion, including as much as $9.1 billion for the dubious missile defense program. At the same time, he wants to put stringent requirements on families applying for reduced or free school lunches or seeking to claim the earned income tax credit -- the government’s main assistance to low-income workers. Family literacy, rural development, environmental protection and education are among the items that Bush would cut back.

Tightening the money spent on a handful of important programs isn’t going to keep the country from plummeting into trillion-dollar deficits. To avoid the economic abyss, Washington must resist the urge to pass a raft of tax cuts that would further enrich the wealthy while starving the government.