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CNN Crossfire

Do Americans Really Want a Tax Cut?

Aired April 16, 2001 - 19:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Our country is at peace, but our government is charging wartime prices. Enough is enough. The American people deserve tax relief.

(END VIDEO CLIP)

ROBERT NOVAK, CO-HOST: Tonight: as tax filing time ticks down, do Americans really demand that relief? Or do they see their tax burden as a necessary fact of life?

ANNOUNCER: Live from Washington, CROSSFIRE. From the left, Bill Press. From the right, Robert Novak.

In the CROSSFIRE, former Clinton national economic adviser Gene Sperling, and in Boston, American Enterprise Institute fellow James Glassman, host of techcentralstation.com.

NOVAK: Good evening. Welcome to CROSSFIRE.

President Bush was out plugging for a tax cut, telling his listeners he felt their special pain today, tax day, postponed one day because April 15th was a Sunday. If you belong to the army of last- minute filers, local post offices all over America will be open late so you can make the midnight deadline. Never before have Americans paid so high a percentage of their income on taxes.

Is that too much, or are they getting their money's worth? Are the rich plundered or are they getting off easy? And is there anybody in America who really thinks this is a decent tax system? Maybe it's Bob Shrum, the crack Democratic political consultant who's sitting in on the left tonight.

BOB SHRUM, GUEST HOST: You know, Bob, any day when you have to pay a lot in taxes to help poor people get health care is a good day in my book.

James Glassman from Boston, Bob complains about the tax burden; so do you. But the Treasury Department reports that the typical family, the federal tax burden fell from 9.1 percent in 1992 to 7.4 percent in 2000. The wealthy paid more because they made a lot more under the Clinton-Sperling economic boom. There's one place they don't pay more: the top 1 percent who get almost 20 percent of the income, pay only 4 percent of the pay roll taxes.

If you guys on the right were serious about tax reform, why wouldn't you suggest that the wealthiest upper income individuals in the country pay the same percentage of their income to support Social Security and Medicare, the middle-class families do, then we wouldn't have to worry about Social Security and Medicare for years in the future.

JAMES GLASSMAN, TECHCENTRALSTATION.COM: Well Bob, as you know even better than I do, Franklin Roosevelt conceived Social Security as essentially a pension scheme. So the idea was, people would pay in at one end and get out at the other end. Very few people in America -- especially Democrats -- who want to change that particular way of funding Social Security.

But, let me just say something: I don't care what numbers you throw around; let me just you a number: for the first time since 1944, Americans will pay in takes 20 percent of the total output of this economy; it hasn't happened since World War II. That is clearly too much in the way of taxes. George W. Bush wants to change that, as do, by the way, 15 Democratic senators. A bill to cut taxes by $1.2 trillion passed the Senate with 65 votes. I think time for tax cut and the majority of Americans understand that.

SHRUM: Well, Jim, they paid a lot less as a percentage in taxes or somewhat less under George Bush Sr. because the economy was in terrible shape. The reason people are paying more is because there are many more people in the higher bracket, because the Clinton prosperity helped put them there.

GLASSMAN: Bob, that's true, Bob. And in fact, what happened is, government has been getting, since 1993, an increase of 8 percent a year, even though inflation is only about 2 percent a year in revenues. That's a whole lot of revenues; forget about the percentages. It's a lot of revenues flowing into Washington. Why?

Because, as people get more prosperous, they get pushed into higher tax brackets. If this continues, every American will be in the 40 percent tax bracket. This is happening all the way through, all up and down to all Americans; they're being bumped from 15 percent to 28 percent and George W. Bush wants to put an end to this and frankly, so do a lot of Democrats and he is right.

NOVAK: Gene Sperling, I don't know if you remember, but back in 1992 we had a quick little lunch in Little Rock; do you remember that?

GENE SPERLING, FORMER CLINTON ADVISER: I do remember.

NOVAK: It was a miserable lunch, but the company was good. I got the strong impression that if you people got elected, and I thought you would, you were going to tax the hell out of the American people and boy was I right. I would like you to look here; we will put it on screen.

This is the individual federal income taxes as percentage of U.S. income: 1944, middle of the war, we had over 10 million men in uniform, 9.4 percent of U.S. income. 1969, Vietnam War, we had a surtax, 9.2 percent. 1981, before the Reagan tax cut cut in, 9.3 percent. 2001, after eight years of Clinton, 10.4 percent of U.S. income!

Congratulations! You are happy with that figure?

SPERLING: Well, look, Bob. Let's get some of the facts here straight. You are playing a game; let's just at least uncover it. What you are doing is saying, say there's 100 people and the taxes go up on the one wealthiest person, who's making a lot of money. The other 99 are basically seeing their tax cuts either the same or cut.

And you're saying, gee, on average, people are getting the tax increase. The fact is, Bob is right. In terms of federal income taxes people -- the typical American family is paying its lowest rate as a percentage of income since 1966. If you include payroll, still the lowest since 1978. But Bob, I am going to agree with you here. I think the surplus is big enough that we should give the tax cuts a family. We ought to give those families a tax cut.

But Bob, what the disagreement is, there is about 5 to 600 billion of tax cut going to people in the top 1 percent. George Bush can be a great conciliator now by reaching over, getting rid of that, and having more debt reduction, more for education, and bring our whole country together.

NOVAK: I want to talk about that. Gene, you are one of the richer people in America

(LAUGHTER)

NOVAK: You are. You are in the top bracket; you had a terrific salary at the White House and I hope that you're making a lot more now, in the private sector. Let me show what you Average Joe -- these are average figures on the U.S. family budget; we'll put it up on the screen.

Shelter: almost $6,000; Health Care: almost $4,000; Food: almost $3,000; State & Local Taxes: more than $3,000; Federal Taxes: over $7,000.

In other words, the average family is paying as much in taxes as paying in shelter, health care, and food. That isn't right, is it?

SPERLING: Bob, I tell you what you aren't saying there: the average family, as a percentage of their income, of what you just showed there, is paying lower taxes then they did in 1978. They're lower than ever year since Ronald Reagan was president. I don't know what we're disagreeing on, because I want to give that family a tax cut.

Tom Daschle and Dick Gephardt and Evan Bayh would like to give a tax cut to that family, too. The difference that we're having here is not of whether we should have a tax cut, but whether we should have an excessive and explosive tax cut to help just people making over $200,000 or $300,000. I hope to be one of them, Bob, but I can't say giving you or me a tax cut should be as much an important priority as saving Social Security, having Medicare prescription drug and making sure we are path making our county debt-free.

SHRUM: I sometimes wonder if those of you on the right talk about tax reform have a double standard. I read where you said that the tax code shouldn't be used for targeted tax cuts. For social purposes like a tax break, health insurance, or energy conservation. Then you call for an investment tax credit for big corporations. Why is it good to help corporations invest? I think it is good, by the way -- and bad to help families to pay for health insurance?

GLASSMAN: First of all, let me just say that in the budget that President Bush just submitted, there is $153 billion in a new prescription drug benefit as well as 40-some billion dollars for under insuranced kids and so forth.

The fact is, there is enough money for large tax cuts, for paying down the debt, as well as for handling some of these social programs. What I'm saying is, you don't do the social stuff through the tax code. It's a very inefficient way of doing it. I'm sure that Gene would agree with me.

What I'm saying, however, is that you want to tax code that encouraging economic growth, and we don't have that now, for a simple reason: we have a tax code that essentially inspires people -- urges people to go out and consume, rather than to save and to invest. What I would like to see a code that makes people, as well as corporations, as well as businesses, invest and save rather than consume. It's better for the economy as any economist will tell you.

SHRUM: Jim, I believe the last time you said the tax code didn't encourage economic growth -- in fact you predicted it would lead to recession -- was when President Clinton bravely, without a single Republican vote, put through the 1993 economic package. We got eight years of unprecedented prosperity out of that. Now, you guys are going to mess around with a tax cut that could create huge deficits and that skewed to people at the top.

Can't we take a more balanced approach Gene is talking about? Have a tax cut that really helps working families and have one of the size that lets us continue to pay down the federal debt?

GLASSMAN: It's so interesting that Gene is now saying that we need a tax cut. I think it's wonderful. In April of last year, the Democratic candidates said: "OK, $250 billion tax cut." Then, after the election, the Democrats said: "OK, $850 billion tax cut." Now, the Senate passes with 15 votes, including the vote of Evan Bayh, Diane Feinstein, many important Democratic senators, a $1.2 trillion tax cut. I think if we wait long enough, the Democrats will come to George W. Bush's position, to the President Bush's position, for the very simple reason that Americans want a tax cut, it makes sense economically, and they are not going to deny it.

NOVAK: Do you want to respond to that?

SPERLING: Look, the issue has never been whether you are for a tax cut. It's what type of tax cut, and whether it keeps the balance that we want.

What I would recommend, Jim, is why not have a tax cut now that's more moderate. Let's see if we have enough money for a real prescription drug plan, let's see if we have enough for Social Security reform, and then...

(CROSSTALK)

SPERLING: And then, Jim -- Jim, if we have more later, we can do it later. Why would our country right now, having just gotten to fiscal discipline and surpluses, why would we take a riverboat gamble on a $2 trillion tax cut? What is the rush? Most families, most governments, most companies would be more prudent.

GLASSMAN: Gene, it's not a gamble. Your own Budget Office said that we are going to have a $5 trillion surplus. It's the best guess. It's the best guess of the Congressional Budget Office, $5 trillion. So, I think we can afford a small tax cut, yes.

NOVAK: I just want to show you how much taxes we're getting -- were you at the U.S. Chamber of Commerce tax rally today? I don't think you were, so...

SHRUM: Bob is trying to hold it here, right now!

NOVAK: Since you missed it, I want you to listen to something that our president said this morning.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: But even after adjusting for inflation, the U.S. government will collect twice as much income tax revenue in 2001 as it did in 1981.

(END VIDEO CLIP)

NOVAK: That is incredible! And you talk about fiscal discipline. The surplus comes because we are overtaxing the people! We're just taxing the hell out of people, aren't we?

SPERLING: Bob, guess what happened? The average family is paying less taxes than they ever did under George Bush's father or Ronald Reagan. Let's be honest about what happened.

NOVAK: I consider myself an average person, and I'm paying more than I ever paid!

SPERLING: Bob, let's be honest about what happened. In 1993, when this country faced large deficits, President Clinton did sign a tax increase on the top 1.2 percent.

NOVAK: Oh, it was more than that.

SPERLING: That group of Americans has seen their after-tax income go up by 171,000. That's good, but it shows that the reason we are having more revenues is because more well-off people are making money, and that's good, but the average family is seeing less taxes than they did under any previous Republican administration.

NOVAK: You have said that about six times, but it doesn't make it so.

SHRUM: But it is true, because you can't refute it!

NOVAK: I want to -- we are going to take a break. And when we come back, we will take a look on just exactly how the president's tax cut is actually -- the burden is -- that it isn't that much for the rich, really.

(COMMERCIAL BREAK)

SHRUM: I'm Bob Shrum sitting in on the left.

Welcome back to CROSSFIRE for Bob Novak's annual tantrum about the taxes he pays. We're now going to turn to the Bush tax cut. Is it the right size? Does it go to the right people? Or, as Democrats suggest, is it unfairly tilted to the wealthy?

Joining us from Boston is American Enterprise Institute fellow Jim Glassman; and here in Washington is former President Clinton's chief economic adviser Gene Sperling -- Bob.

NOVAK: Mr. Sperling, I want to put out some facts instead of propaganda on who this tax cut goes to. We're going about income tax cuts. Let's take a look at these figures on the screen. The top 1 percent of Americans now pay 31 1/2 percent of all the taxes, and under Bush's plan they pay a little more, 32.6 percent. The top 10 percent pay 64 percent of all taxes. They go up to 66 percent, and the bottom 90 percent of all taxpayers pay only 36 percent of all taxes. They will go down to 34 percent.

Why -- as Bob Dole once said, why don't you quit lying about this and tell the truth?

SPERLING: Look, Bob, there are different ways to look at this.

(CROSSTALK)

SHRUM: ... Novak phoned them and said, I need some stats!

SPERLING: Bob, the top 1 percent pay about 20 percent when you include payroll taxes. They would get about 35 percent...

NOVAK: I said federal income tax. I'm talking about individual income tax.

SPERLING: No, no, when you're counting the payroll taxes, though, they pay about 20 percent...

NOVAK: That's not income tax.

SPERLING: ... yet they would get nearly 35 percent. Why should top 1 percent get more than they pay in when you include income taxes? The other question, though, Bob, is that we do have a surplus. We have a surplus because of good fiscal discipline, good economics, and we should make a value choice about what we ought to do with this. The top 1 percent probably would get about $555 billion this tax cut. George Bush -- even if you believe his numbers on education, spends less than 1/10 of that on education in the next 10 years, about 650 billion, 30-40 percent on prescription drugs.

I am just making a different value choice. I would rather have a more prudent tax cut, targeted to families making under 100,000 -- targeted to families making under 100,000, and make sure we have enough for education, prescription drugs, and to keep paying down our debt. And if we keep on path, we can come back in a couple years and do it again.

NOVAK: Well, you are making the same value judgment that Karl Marx made a long time ago, but...

SHRUM: Karl Marx? Are you going to tell us next Karl Marx was the inventor of the progressive income tax?

NOVAK: He was! He was!

SHRUM: I knew you were going to say it!

NOVAK: I want to give you a tax Rorschach test. And we're going to put it up on the screen, it's a Rorschach test. This is Vice President's Cheney's 2000 taxes. He made an income of $36 million. Can you imagine? Only in America can a poor boy from Wyoming make $36 million in one year. And he paid taxes of 14.3 million. That's a 39 percent tax rate. I think it's obscene in this country to make anybody pay that much money in taxes, no matter how much they made.

SPERLING: Boy, you really are a bleeding-heart conservative. I mean, your heart should be bleeding. He only took home 22, 23 million after that, Bob?

NOVAK: Well, you -- you want confiscation of wealth.

SPERLING: Bob, there's tens of millions of people in our country that don't have prescription drugs. There's kids going to poor schools. There's crumbling schools. I want to give a targeted -- I want to give a tax cut. I want an across-the-board tax cut for a 15- percent rate, even the 28-percent rate. But, Bob, that's not Karl Marx. People like Warren Rudman, Senator -- Republican Senator Warren Rudman, Paul Volcker, former Republican Secretary of Commerce, Pete Peterson agree with the basic view of having a moderate tax cut now.

(CROSSTALK)

NOVAK: Come on, give me a break.

SPERLING: Stay on the path of fiscal discipline, and we can come back later. SHRUM: I think those are not Bob's kind of Republicans. But look, under the Bush tax cut, Dick Cheney would have saved $2.4 million this year. The top 1 percent, with an average income of $350,000, would get a $40,000-a-year tax cut. And a single mother making $25,000, Jim Glassman, gets nothing or next to nothing. And there's only half as much money left over as we need to keep the president's promise for a prescription drug benefit under Medicare.

Now, I know you feel really sorry for all those poor wealthy people who followed your famous prediction -- that the stock market, the Dow Jones would go to 36,000. But don't you think this tax cut on its face is fundamentally unfair?

GLASSMAN: Well, first of all, the stock market is going to 36,000. I didn't say it was going to happen tomorrow.

(CROSSTALK)

GLASSMAN: Bob, this is serious stuff. And let me tell you where you guys are all wrong, and that is this: Your general attitude. When people go out and earn money, whether they earn $20,000 a year or $50,000 or $100,000 a year, that starts off being their money. It came from the sweat of their brow. Government, yes, has some kind of claim on the money. But certainly that claim does not go way, way beyond the uses that government should put it to in a normal, sensible way.

And that's what's happening here. We're talking about $5 trillion in surpluses. Americans should be able to keep the money that they earn -- all Americans. And that's the idea of the Bush tax cut, an across-the-board tax so that people can keep a little bit more of money that they earned -- all Americans. And let me also put a plug in today, April 16th, for a simplified tax code. The tax code, as it stands now, is completely obscene. It needs to be changed.

SHRUM: Well, Jim, the one thing I don't understand about this -- because I do take all of this rather seriously, is why you so strongly disagree with the idea that the tax cuts ought to be fair. That we ought to give something to that woman who makes $25,000 a year.

GLASSMAN: Right. OK...

(CROSSTALK)

SHRUM: Because Dick Cheney -- let me tell you. Dick Cheney did not sweat to get that $36 million.

GLASSMAN: Well, you know, look, we can talk about -- I'm sure Dick Cheney is not going to argue with the tax rate that he paid. But let me say this: The Bush tax cuts take the rates, which are now between 15 percent at the low end and 39.6 -- let's call it 40 percent at the high end. Five different brackets down to four brackets, with the bottom at 10 percent and the top at 33. He cuts 6 million Americans off the tax rolls. In other words, the cuts are bigger at bottom than at the top.

NOVAK: And I'm giving you the last word. Jim Glassman, thank you very much.

GLASSMAN: Thank you, Bob. Thank you, Bob.

NOVAK: Thank you.

SHRUM: Thanks.

NOVAK: And I will be back to explain to Bob Shrum what he missed in this whole discussion

(LAUGHTER)

(COMMERCIAL BREAK)

NOVAK: Bob Shrum, Barbra Streisand and you and the rest of the limousine liberals may not understand what the ordinary Americans do -- that this tax system we have is imploding. It doesn't work. It's too intrusive. It pries into our lives. It takes too much money, and more and more people are evading it. We've got to get a new tax system. I hope you join me in that.

SHRUM: Typical family pays a lower percentage of its income in taxes than they did in 1966. And the more ordinary Americans see the Bush budget cuts in health care, police, education and the environment, the more they're going to reject the Bush-Novak tax cut.

NOVAK: They hate this tax system and people like you on the left -- the rich on the left -- love it.

SHRUM: The rich on the left. How about the rich on the right? Sitting in on the left, I'm Bob Shrum. Good night from CROSSFIRE.

NOVAK: On the right, I'm Robert Novak. Join us again next time for another edition of CROSSFIRE.

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