Focus 580; Tax Cuts: Good or Bad, How Much and for Whom? - continued

As you mentioned the beginning of the program this week President Bush unveiled his first budget. And as part of that really the centerpiece a tax cut a 1.6 trillion dollar tax cut over 10 years something that he talked about when he was campaigning. Also as part of his tax proposals he talked about the need to get rid of the estate tax which has been called the marriage penalty. And in the first part of the program we were really concentrating on the issue of income taxes and we'll be talking some more about the same things in the second hour of the program from a different perspective our guest for the program is Daniel Mitchell. He's senior fellow in political economy at the Heritage Foundation in Washington D.C. a former adviser on budgetary and tax matters to the Senate Finance Committee. He writes columns that appear regularly in publications and quoting the Wall Street Journal an Investor's Business Daily. Before joining the Heritage Foundation he was director of tax and budget policy for the group Citizens for a Sound Economy and he has a Ph.D. in economics from George Mason University.

He is joining us by telephone and as always questions comments are welcome all we ask of callers as people just try to be brief so we can try to get everybody in. But of course anyone who is interested in calling can do that here in Champaign Urbana 3 3 3 9 4 5 5. Toll free 800 to 2 2 9 4 5 5. Mr. Mitchell Hello. Oh how are you. I'm fine thanks and thanks for talking with us today. I glad to be on the program. The I think for for people who take a position against the Bush proposal their leading concern seems to be who it is that benefits from the tax cuts. And I want to ask you about the numbers we talked about a lot this quite a bit in the first part of the show. And these are numbers that have been generated by a Washington D.C. organization Citizens for Tax Justice. And I'm sure you're familiar with these numbers. A lot of people on Capitol Hill have been using them in talking about the effect of the cuts and the concerns of some people are basically that.

The people on the very top end of the income scale get the largest share of the cut and the people on the bottom benefit very little. And for example what they they say their projections here Citizens for Tax Justice say that the bottom 20 percent of taxpayers see an average tax cut of forty seven dollars a year. The wealthiest 1 percent they get 50 $4000. Forty five. That's forty five percent of the total tax cut. So people are concerned basically about the issue of. Overall fairness and the fact that the people on the top are getting the lion's share of the cuts and I guess I'm I'm wondering if it is first of all what you think about the numbers and do you think that the this organization Citizens for Tax Justice do they have it right. Well first you know if they asked Citizens for Tax Justice as a very ideological viewpoint they don't like tax cuts they want government to be bigger. A lot of their data is just flat

out wrong according to the Joint Committee on Taxation which is neither Republican nor Democrat. You're looking at the top 1 percent getting thirty one percent of the tax burden. But let's actually address the fundamental point here because the other numbers are wrong. The general argument. Is one that should be should be discussed which is who. The tax cut. And when you're looking at the bottom 20 percent or even the bottom 50 percent of taxpayers the first thing you have to realize is according to IRS data they barely pay 4 percent of the total taxes and people in the bottom 20 percent pay almost no income taxes and so when you're cutting income tax rates it's very hard to give a tax cut to people who don't pay taxes. In my mind that that's not really an argument against a tax cut. That's simply noting that some people don't earn enough to pay taxes and so when taxes are cut they don't benefit. Now on the other hand let's look at the top end of the scale.

According to again IRS data the top 10 percent in this country pay 65 percent of the tax burden on the top 1 percent pay 35 percent of the income tax burden. And so if there's a criticism to be made of the Bush tax cut it's actually that it's weighted disproportionately toward the lower end of the scale. In other words you're cutting taxes on a percentage basis more for people with lower incomes and for people with higher incomes not to mention the fact of course that all of this. All these numbers are based on static analysis which assumes that people don't change their behavior when of course in the real world people do change their behavior and what we saw in the 1980s for instance when Citizens for Tax Justice made the same kind of you know demagoguery and class warfare arguments against the Reagan tax cuts at the end of the 1980s. The rich were actually paying a greater percentage of the tax burden. Even though they were the ones who supposedly got the biggest tax rate reduction and that happened because of what supply sider said would

happen when you cut tax rates people have lessened and sent the hide sheltering under report their income. So honest liberals. Who want to soak the rich should actually be cutting tax rates because we want rich people to pull their money out of tax shelters pull their money out of offshore havens and put it to work for the American economy. Well let's stay with this point for a moment because I think that there are certainly people who would who would make the same argument that you do. That is it's perfectly appropriate for the wealthiest people to get the largest share of the tax cut because they're paying all the taxes. However some people would counter that argument by saying Well there you're really only talking about income tax and if you look at the total tax burden on Americans and you take into consideration things like what people are paying out of their paychecks for Medicare Social Security that in fact. That's when you look at who pays the taxes. Look at total tax

burden. It is true that the people at the top are paying the biggest share of their income in taxes. Oh I wouldn't disagree with what you say there at all. You are. When you start looking at payroll taxes that's a tax that has a very heavy burden on lower income workers. And the president in the state of the Union Address sad. Let's go ahead and address that system as well by allowing younger workers particularly lower income workers to benefit from long term private savings by being able to shift some of that payroll tax into personal retirement accounts. But you know what. I bet you know. 100 to 1 odds that all the left wing groups that are against the Bush income tax rate reductions because they don't help poor workers are going to be against. The Social Security reform proposal. Why because their agenda isn't to. Gets tax cuts their agenda is to keep government bigger and to try to keep people no matter whether they're poor or middle class or rich from getting any tax relief.

Let me that also and I have a caller so we'll get right to this person I promise I won't make him wait forever. Our caller here on the line one but let me come back to one other point that if the if when Citizens for Tax Justice say that under the tax cut plan advocated by the president the wealthiest 1 percent of all taxpayers they're getting 45 percent of the total tax cut. If that's wrong tell me what the wealthiest 1 percent will get. According to the Joint Committee on Taxation which is bipartisan and actually you know on the right we always argue there too. They're too oriented towards static you know. Yes and they're certainly not on the right side of the spectrum but the Joint Committee on Taxation estimates that the top 1 percent get 31 percent of the tax cut and this of course is the same group that currently is paying 35 percent of the tax burden. And that's why honest analysis

not an ideological analysis shows that if anything the Bush tax cut is weighted toward people more modest means. OK so and when when this organization says 31 says the wealthiest 1 percent get 31 percent of the tax cut does this take into consideration how this how these tax payers would Dennet benefit if another part of the Bush's tax plan goes into effect and that he has the estate tax is abolished. Well the estate tax. There's a separate taxes not part of the income tax. So yes I mean if one was to try to take the death tax and try to distributed across the population that of course by definition you're going to make everyone who benefits from an inheritance rich because on the day you get inheritance of course your income you know if you count that as income a set of just the transfer of an asset your income goes up. So it's kind of foolish to conduct that kind of analysis. I mean when we're looking at the death tax we're really talking about a moral issue. Should government tax people a

second time actually probably a third time because we tax income in first turn. Now we double tax the saving. If you invest it and then read taxes a third time if you happen to die and want to pass it on to your kids or whoever. And not only is that economically foolish but it is just flat out morally reprehensible. We are talking this morning in this part of focus 580 with Daniel Mitchell He's an economist with the Heritage Foundation in Washington D.C. And again questions are certainly welcome he'd like to call in the number here in Champaign Urbana 3 3 3 9 4 5 0 5. We also have a toll free line so if it would be a long distance call we'll pay for the call 800 to 2 2 9 4 5 5 3 3 3 wy a little toll free 800 to 2 2 W while we have callers here on the campus to start a line one. Hello hello. Yes yes. First thing I would rather see this

discussion stay on the topic of who gets to tax good rather than who's philosophy is about bigger government or smaller government. This is not about spending more. This is a lot giving a tax back to the people. Having said that I wanted to point out a point that was discussed in the previous hour by the previous speaker that. The people below the median income median income. Have not gained anything in terms of purchasing power in the last 25 or more years. As a. Result. The income concentration in the upper 10 percent or less of the population has become even more lopsided. And that is the reason why

they're paying more taxes. So it's kind of a circular argument to say that the lower people are not being taxes in the same proportion and therefore they shouldn't get a tax cut to begin with. The tax code was reformed in such a way in the 80s that that the higher income benefits more. And now we're arguing that because they are earning more and paying more in taxes today should get them to expect that this is. Quite illogical. I would like to hear some arguments that are more in tune with that kind of basic logic. Thank you. All right. Well Mr. Mitchell I guess I have a hard time divorcing this issue from who believes in a bigger government and not because all of the left wing groups that are arguing against the tax cut one of their biggest arguments is that this is going to give money back to taxpayers that we think would

be better spent by politicians. And so if their agenda and their philosophy that is underlying their opposition to tax cuts is that they want government to be bigger than that I find it silly that the notion that I shouldn't address the argument that they're making on the other side. But I guess I would also throw in that while I think that the death tax repeal is mostly a moral issue I also think there's an underlying moral or philosophical issue behind income tax rate reductions. A lot of the opponent. It's of tax cuts seem to think that this pile of money belongs to the government and it's unfair if the government decides to give the money the high income people as opposed to low income people. It's not the government's money. This is money that people are out there earning generating wealth for our economy keeping our economy the most prosperous in the world and the question is should we reduce tax rates across the board for all taxpayers. And if you make a lot of

money you'll get a bigger size tax cut to make a little money you get a little side tax cut the whole reason for that is that if you make a lot of money you're paying a huge pile of taxes. I mean there's no question that if this tax cut goes through Bill Gates is probably going to get a tax cut a million times bigger than just pulling a number out of the air. I don't get upset about that. Bill Gates is paying a million times more in taxes than me. I mean that's that's the fair approach to cutting taxes is also the approach that's going to increase our economy's long run performance because we want to reduce the barriers that the tax code places. Yeah on work saving investment made for people who think that we'd be better off with high tax rates and income redistribution. Move to France. Go ahead and be in a country with double digit unemployment and economic stagnation if they really think that's the way to go. You know they should actually go live it. And I think they'd come running back to America about as fast as they could saying please give me a free market system.

So you for those for those people who would say it would articulate the concerns of the caller who would say that the economic boom of the US economy over the last eight years has not benefited everyone equally has primarily benefited the people who were already at the top. It has further increased income inequality and that for those people who would say that the tax cut proposal the administration has made will simply further income inequality more because it gives back more money to people at the top. You would essentially say well that's that's yeah that's the way it isn't and maybe that's the way that it should be. I actually don't think that's the likely impact but if that was the impact I would say that America is a country that allows you to rise as far and as fast as your talents ability and willingness to work hard will take you. I mean Bill Gates became a billionaire again Michel. Maybe I didn't. Does that mean that somehow when Bill Gates became a billionaire he stopped me from becoming a billionaire or we took money away from me no of course not. People in this country become rich because they're offering something of value to their fellow citizens

products and services that we voluntarily go out and buy and if Bill Gates becomes rich because he made the rest of our lives easier by creating the software to power the technological revolution then more power to him. If Warren Buffett becomes rich by being a good fund manager more power to him. I'm not. I don't. I guess I just have a problem with his whole hate the rich mentality. I mean I think the reason that America has prospered and the reason that the vast we've created this vast middle class is precisely because we have a system that allows entrepreneurs and risk takers to to to in effect go out there you know put a stake in a startup company take a chance you know maybe nine times out of 10. The company is go bankrupt with an ever so often you get these these new technological outbursts of innovation that's been very good for our economy. You do realize there's no such thing as a venture capital fund in a socialist country like France. And that's why there's no such thing as a Microsoft and in a country like that. And we really do have to

decide in a global economy do we really want to in effect put a ball and chain around our entrepreneurs with high. Discriminatory tax rates or do we want an economy that's going to prosper are. Giving. All people greater opportunities to climb the ladder of success as opposed to the sort of static negative and be driven class warfare mentality. I have several people here who are going to want to talk and I would bet money take issue with you or maybe not anyway. One thing I'm interested in your reaction to and I don't really know what the position of Warren Buffett and and Mr. Gates is on the tax cut but but Mr. Gates is Father Warren Buffett George Soros a number of rather wealthy Americans have indeed come out publicly and said they. I would be opposed to the elimination of the estate tax and they because I believe they've argued that they're concerned

that there would be a great drop off in charitable giving. And I'm just curious about your reaction to the fact that here now some of these very wealthy individuals those people who would you would expect would benefit if we got rid of the estate tax would benefit more than you know the vast majority of the rest of the country. What's your reaction to them coming out and saying no we should maintain a state tax. Oh I'm I'm sure there are plenty of wealthy people who for some reason feel guilty about their success. But my view is if we get rid of the death tax. There's nothing wrong with them. And they're well stating that they want 55 percent of their money to go to the government. And if they really are silly enough to think that that money would be better spent going to the government than going to you know charities or to their children or to ever else they might want to give it to. There's absolutely nothing to stop them after we get rid of the death tax from giving that money to the government. And I just I mean everyone. Whatever floats your boat.

If George Soros really thinks that the government spends the money better than his kids or the charities he would give the money to let him do it. But he shouldn't have let his guilt feelings that success interfere with the right of other Americans to pass on assets that have already been taxed two times to their children. OK let's get back to the phones here. And again I hope people will you know remember you're making room for other folks here too so try to help us by making your points and giving the guest a chance to respond and then go on to other folks are here in line will start in and on our line number four. Hello hello number four. Yes yes I was just looking at some of the old tax tables from 1977 and the estate taxes. They started out ten thousand eighty percent and to and they went on up to seven hundred eighty eight thousand eight hundred forty nine percent.

Now there are six hundred seventy five thousand dollar $650000 exemption for each person and their spouse. Plus the other taxes like. The tax planners have the different other programs. You have been having deferred taxes when people have a terror tent and then they there's the old tax law from years back where people can take their stock and rather than have their deferred taxes treated that the regular tax rate so they can treat them as capital gains. And this postpone tackling now we lowered the taxes. You're talking about there were more affluent these people get out. Of these your. Own taxes. They'll get the reduction of that. I had it figured out one time and I believe I mentioned over the

station what it would cost the government in 1992 by lowering the taxes from twenty eight to 18 percent on just the IRAs that were out at that time and I didn't talk about the other before and we've had to the Section 179 depreciation that's been raised. Now you lower the taxes. I think Illinois tax recoup from 1969 some of those some of those expenses. If you don't recall those things that seemed like and equity. Well you've made some rather company tax and tax property isn't taxed in this country and out here rural property is taxed every year real estate.

OK well if I can jump and yeah I want to do is to confess that I don't know Illinois tax law on the local property taxes and what Illinois recoups on things and so you know when I when I don't know something I always think it's important just to admit that right up front what I can say though looking back on the death tax and some of the issues related to that. If you start from the promise as I do that government shouldn't tax savings that's already been taxed once met effect twice before that frankly it whether the rate goes from you know 55 to 28 18 or where I think it should be zero the point is that. Don't double tax income especially when the effect of double taxing that income is dip. People for saving and investing in every economic theory known to man even Marxism they all agree that capital formation savings and investment is to key to economic growth and so I don't think our tax code should punish people for doing precisely that.

One year we have a surplus. And how many years haven't we had a surplus. We talk about government. I don't insert that word people if the people have debt. It's the people's money and your debit and credit and it's your debt. It's my debt and one man said he had more money to put in the bank back in the 80s. Because the lower the taxes if you paid less on the mortgage your house and you would have more to put in a bank to but mortgage would still be there. Well it sounds like maybe the caller is making the argument for greed for more debt. Reduction rather than tax really. But we have a 5.6 trillion dollar surplus expected over the next 10 years and you know whether that's a trillion dollars to hire a trillion dollars to low. You know who knows but the point is Bush's tax cut is only 1.6 trillion dollars and of course once you factor in the supply side effect the actual size of the tax cut will be far lower

so there's going to be plenty of money to pay off the debt as a matter of fact. Too much money because a lot of the debt is 30 year bonds and we just don't have enough debt out there to repay unless we want to give like the Japanese central bank a big premium to buy back long term debt that they're holding. So the real question is do we want to cut taxes to cement our economy's performance and keep us number one in the world economy or do we want to leave all that extra money in Washington so special interest groups and their Republican interest groups and Democratic interest groups are not making a partisan point. Do we want to leave the money in Washington so the special interest groups can spend it. I'd rather give it back to the people who earned it. We hope the Gawler will forgive me if I want to go on here because the lines are full I want to go. Some other folks a chance and we'll go next to a caller in our COLA line one. Hello. Hi. Several quick points. One is that your comment that the surplus doesn't belong to the government belongs to the people. I mean rhetorical A That sounds fine in the

sense that you have implications the government has something legitimate. But the truth of the matter is we're democratic government. We invested in our officials the power to tax is the money in the government coffers as legitimately the government money the government the people united states. And so the argument that we ought to short circuit the discussion on what to do with the surplus and that there's a moral obligation to return it seems to me not to be well-grounded you have to look at the variety of things that money might be used on decide what to do but to simply argue that it's still just an illegitimate that the government has a surplus. I don't think you've established. The thing about the double taxation on the estate tax. You use some really hysterical language there referring to guilt feelings of Soros and and these people. If you look at the argument they make it has nothing to do with guilt. It has to do with their concern about the long term well-being. Of the country of which

they're citizens and they believe that it's been well established and you can look at Britain in the 19th century where you have a huge estates that are passed on generation after generation and this money in trust funds and so on is not in entrepreneurial hands. It's dead money. So if we have to fund the service of the government one way or the other and there is nothing any more illegitimate about using an inheritance tax than there is that most states and local jurisdictions use property tax and tax it year after year after year. There's nothing immoral about that. It's simply decision that the people have made that that's how they're going to fund it. The services that the people want to have I guess that would make two points in response. Number one is that no one short circuiting any debate this thing has to go to the house it has to go through the Senate. There's going to be ample time for everyone to get all their arguments in. What I'm saying though is that from my perspective in addition to

economic arguments in addition to global competitiveness arguments in addition to arguments about the size of government there's also I think a moral argument that it's just wrong to double tax someone's because they died now someone else can say well no I think the moral argument is that we should tax that money. You know we are going to you're making the assertion that it's this argument with offical perspectives. But go ahead and make the argument. Why is it immoral rather than simply saying it's immoral. Explain because and explain by using analogies a different form of taxation. In almost every jurisdiction in the US property taxes the way of collecting revenue. People pay on their homes over and over and over again. And I would think to make the make the double impact on the property just because someone died so it's not just an income tax or a savings related thing. But I also want to make you mentioned on your other avoiding my question. I think I answered your question but I want to also respond to the point about the death tax about trust funds not being the entrepreneurial use of the money you're exactly right but why are the trust fund set up the trust funds are set up precisely to

avoid the death tax. If we got rid of the death tax then people would use the money in ways that they actually thought made economic sense instead of trying to minimize their tax liabilities we have this entire industry of life insurance underwriters and fund raisers and special interest groups that exist solely because of the death tax get rid of the death tax and all that money gets freed up to be used for productive purposes creating jobs for the American economy boosting our competitiveness internationally. The trust funds are set up to pass on money to the next generation. And you don't trust them to know why the death tax. That's why they set up the trusts. But you know again you have asserted several times it's immoral for double taxation but you have yet to make an argument on why it's immoral. Because I pointed out to you that the home that I live in is not generating revenue year after year. It's a way that I save money and I'm taxed on it year after year. If if the inheritance tax is

immoral then one of the fundamental ways that state and local governments use all across the US to raise revenue by the same token would be immoral. So explain rather than simply asserting it's immoral given the connecting links what are the premises how does one get to the conclusion that it's immoral. You've asserted it over and over again but you haven't given us any argument on it. And we see throughout our society we use this form of. Not just double taxation but if I live in my home for 50 years I've been taxed on it fifty times. But if you were taxed 50 first time simply because you died then I would think that there would be an important moral component to the property tax debate. And that's what's happening here and the case of the federal death tax now make the moral component. That's what I'm waiting to hear. Why is it the moral but it's not moral. Free with it is that government shouldn't tax people a second time of their income simply because they have the misfortune of dying. Now maybe you don't see that as a moral issue I do see it as a moral issue. I'm how I am. You see it as an economic issue I see it as an issue that

undermines U.S. competitiveness. I see it as something that harms savings and investment I see it as something that harms charities. I see this something that blocks entrepreneurship but I also see it from my perspective as a moral issue. And I think were about the point we've been over the ground a few times and I'm not sure we're going to get any further. My apologies to the caller if he felt I was doing him an injustice. Let's go to Urbana line too. Hello. Hi. I've got a couple things one of them is regarding the estate tax one thing that I've learned that that is bothersome even if I do end up doing away with it is the scenario where it's not double tax that it's never taxed. Where somebody in their life time parents in their lifetime have an estate that grows because of capital gain. And they are able to pass it off to their offspring without an estate tax and that money in essence never gets taxed.

It's sort of the flip of what you're talking about. I believe it was that a representative Kyl that is proposed. A compromise that would make sure that that that gain gets taxed at some point which seems reasonable to me. The other thing is I'm a little concerned about how far the two speakers numbers have varied and I'm trying to jibe them in terms of how much the top 1 percent pays or doesn't pay and I'm I'm thinking that. In one case we're talking about the total amount of dollars that the top 1 percent pays. And in another case we're talking about the difference in the marginal rate. But. When we when we have two people from opposite viewpoints diverging that much. You know I would just like some comment on that I wonder if you could explain. Well I can't really comment on why Citizens for Tax Justice came up with the number they did I simply refer to numbers not at the Heritage Foundation came up with

but numbers that the bipartisan Congressional Joint Committee on Taxation came up with. But even even having said that I think the argument shouldn't be about numbers it should be about what is the right type of tax policy for America and I think the right to tax policy is to have lower rates to improve our economy's performance and make our economy more internationally competitive. And that I think is the real underlying issue with the rate reductions and then as I said to the previous caller I think there's an important moral component to the whole death tax debate. About that my first comment. The other state affair I was talking about I die I die for I die. As you were going along I started thinking about answering the second part of the first part. The thing about capital gains is that when people purchase assets they say they purchased stocks and bonds they're purchasing those assets with after tax dollars.

And so it's not a limb. It's not an avoidance of tax to then pass those assets onto their children or whoever they want to give the money to to tax the capital gain when you purchase something with after tax dollars is in and of itself a form of double taxation that we shouldn't have in the system. Now if on the other hand if you've got to purchase stocks and bonds and deduct the cost of those stocks and bonds then you would be exactly right it would be an avoidance of taxation to be able to pass it on without having it taxed. Thanks. Thank you. Let's go. Champagne next line 3. Hello. Hello good morning. This is been very very interesting I think all of us agree that we're at a very very critical juncture in our economy and the decisions that we're making right now are going to be you know extraordinarily significant not only for our generation but for the next. And it's precisely for that reason that I would like to caution the speaker and anybody involved in this debate to please

avoid things like you know asserting a moral right to your position please just say this is my preference but saying this is the moral position and therefore if you take another one it will be immoral. I don't really think that's going to get it anywhere. Nor do I say that anyone who would like to differ on specific policies or specific numbers in the tax cuts is necessarily to be dismissed as left wing. It's very very possible to be quite moderate to be quite middle of the road to really have the nation's interests at heart and to differ with you. And there's really no need to to dismiss people as left wing. And finally this goes back to a much earlier point that we made when we talked about very very. Important entrepreneurs who have been very very successful in our society and I like to get you know applaud

them and their contributions. However it's also possible to make the argument that we don't know how many of their future contributors in future entrepreneurs are out there and if we continue to skew income if we don't pay attention to things like schooling and community and people health and you know libraries if we really don't make things more equitable how many future wonderful contributors to our society are we really holding back. So I say the distributing resources more equally is not hating the rich. It's simply giving others the potential to really be able to contribute. Important members of our Friday. But of the two points I would say in response I guess I'll start by

saying that morality like beauty is in the eye of the beholder and I'm simply stating from my viewpoint. I think it's immoral to tax someone a second time on their income simply because they die. Other people obviously can say that it is the moral thing to do or they can use economic arguments they can use international competitiveness arguments but I just think it's wrong period. It's something that you know from my viewpoint. No civilized society should do something like that to people when they die. Now in terms of your argument about you know what is the best thing we can do to ensure that we have greater opportunities for other people to climb the ladder of opportunity to learn to prosper. And I think that lower tax rates empirically speaking look around the world of the country with high tax rates and you have much less income mobility than a country like America. You know Bill Gates was a college dropout a lot of the wealthy people in America you know aren't wealthy because their

parents gave them money they're wealthy because we have a system that at least to a large degree allows people to rise as far as fast as their talents ability and willingness to work hard will take them. And I think we that kind of system requires that the burden of government not be too heavy. That doesn't mean of course that you don't have libraries and things like that. I mean you know those are things that I think for the most part state and local governments do a reasonably good job with. But I think we want to make sure. That we have the underlying economic policies that allow people. To climb that ladder of opportunity. By great. But I think it's possible that that economic policy would be a different one that I don't think we all have death wing or immoral. I think if we could just sort of agree to disagree to disagree that

love that's what makes the world go round. Thank you. Well thank you for the call. Forgive me did I hear correctly did I hear Representative. Of the Heritage Foundation argue for moral relativism. I know I know other people have a different perspective or would argue that my perspective is the one that is right and just but I recognize that she sometimes I don't persuade a lot of people. We have about eight minutes left and we're talking with Daniel Mitchell He's an economist with the Heritage Foundation in Washington D.C. And we're talking about the proposals that the Bush administration has made for tax cuts 1.6 trillion over the next 10 years and we both hours of the program this morning devoted to the discussion from two different perspectives in the first hour you heard from economist Mark Weisbrot from the Center for Economic and Policy Research. And then we have Mr. Mitchell with us here in this part of the show. And we are growing short on time. We have a number of callers the lines are full in fact we will try to. In as many as we can going next in line to a caller in Chicago. Hello.

Thank you. In terms of taxation you use the old show business phrase you ain't seen nothing yet. I believe that whether it's whatever now it's that we're talking about the static the ideological bond the honest one. What about the real analysis in terms of catastrophes as the recent earthquake indicated is on our shores and the usual hurricanes that create such catastrophes and disasters seasonally and the other things that are occurring in a way of agricultural epidemics and pandemics of health that were suddenly seen are rising I don't know what the costs for taking care of these measures have been figured into the budget and it accounts for some like to for things that have to be taken care of like the infrastructure and the reach of the entire school system. So I don't know if all those things have been figured in to the point where we can say there is going to really be

a tax surplus if you let alone any incursions that our armed forces may have to make in other parts of the world. So I think this whole matter of the tax surplus is illusory so I just thought I'd drop that in. Ok well and let's get a response as I know Mr. Mitchell that there are people who are concerned again. That argument they say you know if we cut 1.6 trillion dollars that's 1.6 fewer dollars and in the federal budget in the federal coffers that we might then one day find we needed. Well they'll still be four trillion dollars of surplus left over for these for these other things and don't forget when when the nonpartisan Congressional Budget Office puts together these estimates of future surpluses there are incorporating. Not only the current level of government spending but they're adjusting that level of spending in future years to reflect things like the growth of the population and changes in the government programs that would reflect these increased demands that might be put on it. And and so it's not as

if any of that 5.6 trillion dollars projected surplus would require changing. A single government program by even a penny. I mean not to say that that shouldn't be done I probably have a different perspective from your caller and that if there's a if there's an earthquake in Seattle I think that's first and foremost something that the government in Washington state should be looking at the City of Seattle. I think that there is in some sense an obligation on the part of homeowners and businesses to carry insurance policies and in other words I'm not sure that we want to instantly say any time something bad happens anywhere in the country. That is the job of other taxpayers to subsidize people who have it taking the normal commonsense precautions in terms of purchasing insurance policies and so on and so forth. Well let's go to Ken Monday for another call if you're line 1. Hello. Hello. Yes I'd like to point out that there's a very interesting editorial in today's Tribune about a fair fix for the death tax which

says basically that where the death tax but tax any property that is inherited at the cost that there was originally got rather than adjusting it for the current value on a day of a death of a person I assume that must be the same issue that was raised earlier about whether or not you want to impose a capital gains tax. Yes. People when they when they inherit some property and. And my view is that if the asset in question the underlying property was purchased with after tax dollars then no I would not want to impose a capital gains tax because that would be double taxation that would undermine the incentive to save and invest and that I think would probably be the way most of those assets were purchased. I'd like to make another point. Money begets money. And currently the rich in this country are. Growing richer faster

than middle class and poor. The second thing is that word of the rich spend their money they spend a lot in villas on the Riviera and Mercedes of it. All that money goes out of the country. The only justification for allowing people to have that much money is that something I saw on the History Channel recently that. After the third generation. Most of it is wasted or squandered by the people who inherit it. Well you know I think that's a great point that's one of the reasons why I think people who are concerned about concentrations of wealth. I think those concerns are overblown because if you look at some of these families like the kind of these in the Rockefellers you know it doesn't matter whether they're Democrat families Republican families for the most part. You know outside of that the entrepreneurial generation that created the wealth that the subsequent generations pretty much just dissipate the wealth because all they do is spend it. Now having said that I might disagree with you on the other point. I don't

want politicians and bureaucrats to have the power to tell us where we're allowed to spend our money. So if some rich person wants to you know blow their money on a bill and the Riviera as opposed to a villa and Santa Monica I think that's their right. And it's not it's not the role of government to tell us how we should spend our money. And some of us might waste our money. Some of us might say you know be very frugal with our money. But you know like beauty and I guess also like morality it's got to be in the eye of the beholder in terms of what's what's a waste of money some people have hobbies of collecting model trains other people might think that's a big waste of money but let's just make sure the government doesn't get involved in telling us how we can spend. We're going to have to stop because we've come to the end of the time I want to say Mr. Mitchell thanks very much. Well enjoy talking with us. Our guest Daniel Mitchell He's an economist with the Heritage Foundation and I do also want to mention that all the organizations we've we've mentioned the Heritage Foundation the Center for Economic and Policy Research Citizens for Tax Justice they all have websites if you'd like

to look at what they have to say on this issue. And you have internet access you can go there. Most of the plenty of other information too and perhaps on other days we'll be getting back to some of these subjects but for the moment we will have to bring things to a close.