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CNN Live Sunday

What Will the Bush Tax Mean for the Average Taxpayer?

Aired April 08, 2001 - 17:33   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.
STEPHEN FRAZIER, CNN ANCHOR: The budget will be unveiled along with two other big economic stories that have been already occurring in the United States, a rise in unemployment numbers and the Senate's passage of a 10-year tax cut of about $1.2 trillion, which, as you know, is less than proposed by President Bush.

We're going to talk a little about that now with Rick Dunham, who is White House correspondent for "Business Week" magazine. Mr. Dunham, thank you for joining us.

RICK DUNHAM, "BUSINESS WEEK": It's good to be with you.

FRAZIER: It is quite a bit less than the president had asked for, but as you said to us earlier, it's a huge tax cut.

DUNHAM: Yes, this is much bigger than anyone talked about in the campaign. If you just think when Al Gore was talking about a half- trillion dollar tax cut, and then the Democrats were talking about $800 or $900 billion, and already we're above a trillion dollars.

FRAZIER: Well, philosophically, Republicans just want to give that money back to the taxpayers, but you were also talking to us earlier about its effect on the economy and the sense people have of whether their wealthy or not. Is this enough money to help them feel that they can go out and start spending again?

DUNHAM: Well, I think it would be a psychological impact. It's not enough money in the tax cut, especially in the first couple of years, to have a real impact on economic growth, but the idea that people think that money is coming back to them and then they continue to spend. I mean, one of the problems right now with the rising unemployment is that if consumer confidence softens and people stop buying products, then you're going to see unemployment continue to grow.

FRAZIER: Is that rising unemployment one of the things that first indicates a softening economy or is it in there sort of in the middle of a downturn?

DUNHAM: Yes, I'd say it's in the middle because right now, what happens is that companies see a downturn in ad sales, a downturn in purchases, and then they lay people off. Some lay people off because they think things might get worse. So, usually it's not a leading indicator, but it's sort of in the middle, as you said. FRAZIER: Now, the tax issue isn't directly related to what happens in the financial markets, but you believe it'll have a bit of an effect.

DUNHAM: Right, and psychologically. I think in terms of real dollars, what you're talking about for the first year for that up- front tax cut is probably no more than $100 or $200 for an average family. So, it's not really that much, but again, if they think that they're going to be getting $1,600 a year down the road, it could have some impact.

FRAZIER: As you said, it could help settle things down a little bit at a time when the markets just seem to be incredibly volatile.

DUNHAM: Right, and you saw last week, all the ups and downs, and right now, what -- the figures on unemployment sent the market plunging on Friday, and right now, the markets are looking for anything positive to try to get back to a stable point.

FRAZIER: You said the Senate voted for a smaller cut than the president asked for in order to fund education and health care. In your analysis, would those dollars be enough to reform both of those sectors?

DUNHAM: Well, if you look at what the Senate voted for, the prescription drug benefit could be nearly twice as big as what the president is going to propose under the Senate plan, so it really would make a difference there. And in education, you'd spend a lot more money to go to districts that are underperforming right now. So, it could make a difference in those targeted areas.

FRAZIER: Now, the president really didn't offer up any surprise when he proposed his tax package. It was pretty much the one he's been talking about during his campaign.

DUNHAM: That's right, all year.

FRAZIER: How about the budget? Any kind of, you know, last- minute surprises that took you off guard?

DUNHAM: I don't think we're going to see any surprises on the big picture, but what we have never seen is some of the detail. The president, when he released the budget outline a month ago, just had the figures for a whole department, like Health and Human Services. What we're going to see is bits and pieces, and I think the things to look for are things like food safety or things like enforcement of environmental laws.

FRAZIER: Were you surprised at some of the, people are calling them roll-backs, or some of the reversals that the Bush administration has applied to the last-minute Clinton rules on things like environment and work place safety and food safety?

DUNHAM: I really haven't been too surprised because right now, other than the carbon dioxide turnaround, which did break a campaign promise, the president is doing exactly what he said. I think a lot of people expected him to be more moderate than he is, but right now, George Bush is basically doing exactly what he said in the campaign, and he said all along he was a conservative. He just said he was a compassionate conservative.

FRAZIER: Now, some magazines, including your own, have done analysis of what people in different tax brackets would take away from this tax cut if it holds up in tact. You're saying average, it's about $125 per taxpayer.

DUNHAM: Yes, and again, that depends if you're talking the first year or after it's all phased in over five years.

FRAZIER: Right, right, and so it doesn't seem to have the big -- even psychologically, that doesn't seem enough to help my psyche.

DUNHAM: Right, well, again, if you earn $250,000 a year, you may get a thousand back at the end of this year with a tax cut, but if you're in there in the $50,000, you know, you're talking more about $200 and again, lower down, $35,000, it might be $50.

FRAZIER: Well, we'll see how that all plays our and we're grateful for these insights on a Sunday afternoon. Rick Dunham from "Business Week" magazine, thank you for joining us.

DUNHAM: You're welcome.

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