Text of "A Tax Cut with a Purpose
July 7, 2008 - 8:25 PM
(Editor's Note: Following is the text of a speech as prepared for delivery by Texas Republican Governor George W. Bush to a luncheon of the Greater Des Moines Chamber of Commerce, Des Moines, Iowa.)
Thank you. From the first day of this campaign, I have been deeply grateful for the warmth and welcome of this state.
Today, I want to share my tax cut plan with you, and with America. A tax cut designed to sustain our nation's prosperity - and reflect our nation's decency.
For nearly twenty years, with rare exceptions, our economy has been strong. America's long economic boom has defied all prediction and precedent.
Twenty-five years ago, experts talked about "limits to growth." We were advised to lower our expectations and ration our dreams. Ten years ago, we were told our country could not compete with the rising economic powers of the world. That we were slipping into the second rank and the second rate.
In America, however, pessimists are seldom prophets. Instead of finding barriers, we have crossed boundaries. Instead of decline, we have seen economic growth beyond all expectation. Consider one fact: For the last 17 years the American economy has created jobs at a pace equal to one new General Motors every four months.
This is a miracle, but not a mystery. The momentum of today's prosperity began in the 1980s - with sound money, deregulation, the opening of global trade and a 25 percent tax cut. And the economic growth of the 1980s provided the venture capital for the technology revolution of the 1990s - creating new wealth out of silicon and genius.
Along the way we have confirmed some truths and discarded some dogmas.
Government can be an ally of enterprise - by creating an environment that rewards work and inspires investment. But government does not create wealth. Wealth is the economic measure of human creativity and enterprise. The success of our economy is not a tribute to politicians, hungry for praise. It is a tribute to the effort and risk-taking of Americans. It is a tribute to the power and possibilities of freedom.
But, for America, progress must be more than productivity, and success more than wealth. Even in the best of economic times, we expect more from our country. We want our free society to be a just society.
Everywhere I've gone in this campaign - from farms in this state to Latino communities in California and New York - I've talked about prosperity with a purpose.
We want our prosperity to endure. But the purpose of prosperity is to ensure the American dream touches every willing heart - reaches every man or woman who works for a better life.
This is the strength and example of America. Our political system is unique - but so is our economic system. We prize competition and limited government. But we must have other priorities that give direction to our prosperity: social mobility and family and equal opportunity and the entrepreneurial spirit.
We believe in the profit motive - and in the Golden Rule. We are a land of rugged individualists - who are committed to a common good. We want a prosperity as broad and diverse as America itself.
So my tax cut plan is not just about productivity, it is about people. Economics is more than narrow interests or organized envy. A tax plan must apply market principles to the public interest. And my plan sets out to make life better for average men, women and children. \tab
Here are the key elements:
I will double the current child credit to $1,000 per child.
I will replace the current five rate tax structure of 15, 28, 31, 36 and 39.6 percent with four, lower rates: 10, 15, 25 and 33 percent.
I will expand the charitable deduction, allowing taxpayers who do not itemize their returns to deduct contributions.
I will increase the annual contribution limit on Educational Savings Accounts from $500 to $5,000, and expand them beyond college, down to Kindergarten.
I will eliminate the death tax.
I will restore the 10 percent tax deduction for two-income, married couples, greatly reducing the marriage penalty.
And I will eliminate the Social Security earnings test - an unfair burden on working retirees.
These proposals, behind the dry numbers, represent and promote the enduring values of our nation.
Let's start where the need is greatest: with social mobility for hard working American families. We need a tax system that makes it easier, not harder, to join the ranks of the middle class. Half the revenue cost of my income tax cuts goes to financing two changes which I believe are vital for encouraging upward mobility.
I propose we cut the current 15 percent tax bracket by a third - to a 10 percent rate - for the first $12,000 of taxable income for married couples. It's worth recalling that when the income tax was started in 1913, it was intended only for the very rich. It had a top bracket of just 7 percent, then raised to 15 percent. It never occurred to anyone back then to tax the lowest income groups at high rates. But the current tax code does just that. Today, waitresses, store clerks and janitors are paying higher tax rates than were paid by the Morgans, Vanderbilts and Rockefellers of another era.
I also plan to double the child credit to $1,000. This, combined with lower tax rates, can completely eliminate taxes for a four person family earning $35,000 - a tax cut of over $1,500. Many two-income families making $50,000 a year will see their income taxes cut by half.
Single parents will also see their taxes cut drastically. Today, a single parent with one child earning $25,000 per year pays almost $1,500 in income taxes. I will cut that by over two-thirds - over $1,000.
It is not just the amount of taxes that matters, it's also what the economists call a taxpayer's marginal rate: the taxes we pay on every extra dollar we earn. That rate determines the incentives to work.
Under current tax law, for example, a single waitress supporting two children on an income of $22,000 faces a higher marginal tax rate than a lawyer making $220,000. As she moves up, the federal government starts taxing her income at the same time it is reducing her Earned Income Credit benefit. She can work overtime. She can earn a raise.
Yet when all taxes are considered, half of her new earnings are taken away. In other words, the hardest hours of labor are taxed at the highest rates.
Under my plan, she will pay no income tax at all. And she will be joined by 6 million other low- and moderate-income, working families, who will be removed from the tax rolls entirely. That is one of every five families in America with children.
We will take down the tollgate on the road to the middle class.
My second goal is to treat the middle class itself with greater fairness.
I propose that we establish a basic principle: No middle-class family should face a federal income tax rate higher than 25 percent.
Many middle class families are working three jobs: his, hers and the full time job of caring for their children. The tax rate cuts and child credit increases in my plan will help.
But given their burdens, these families do not need a marriage tax as well. So I propose we restore the marriage tax relief that Ronald Reagan passed in 1981. For a two earner couple, each making $30,000, this will mean eliminating their marriage tax penalty of over $760.
Our society has taxes on alcohol and tobacco and gambling. We call them "sin taxes." But the tax burden on families is a "virtue tax" - discouraging the most important commitments and obligations of life. Under my tax cut plan, families will be rewarded, not punished, for being families.
Securing this measure of fundamental fairness for the middle class accounts for one third of the revenue cost of my income tax changes.
Third, my plan will encourage entrepreneurship -- the path to prosperity taken by so many minorities, women and young people.
Across America, more than 1 in 5 jobs is created by a business that didn't exist a decade ago. And the story of this success is written in many hands. Between 1987 and 1997, the number of Hispanic-owned businesses more than tripled... African-American and Asian-owned businesses more than doubled. Since the 1970s, women's share of small business ownership increased from 5 percent to 38 percent.
One basic problem: Many of these hard working risk-takers find that government expects to be a partner in their success - sharing none of the risks, but nearly half of the profits.
Let us lay down another basic principle: No one in America should have to work more than 4 months a year to pay the IRS. The federal government, in peacetime, has no business taking more than 33 percent of anyone's paycheck. After all, the entrepreneurs of America create jobs, take risks and make their profits with honor. My tax cut plan will expand their ranks by encouraging American enterprise, not penalizing it.
Setting the top tax rate at 33 percent will take about one dollar of every six of the revenue cost of my income tax reductions. Entrepreneurs and small business owners are also singled out for punishment by the estate tax - better known as the "death tax."
Right now, as every farmer knows, inheriting a family business generally means inheriting a tax, on assets over $650,000, of between 37 and 55 percent. Family businesses often can't afford this. They may have assets, but lack ready cash. Many inherited businesses fail. In nine of ten cases, the heirs list the death tax as a major cause.
The death tax penalizes those who want to build on the wealth created by their family. It impedes economic growth by seizing the capital needed to make small businesses flourish. It can tax wealth three times over - in the earning, in the transfer, and in the sale of an asset.
When a man or woman builds a business, they are also leaving a legacy. Their death should not mean the end of their life's work. This tax violates virtually every principle of common sense and free enterprise - and I intend to abolish it.
Fourth, my plan takes the side of compassion and giving - because a prosperous society must be a generous society.
A rising tide lifts many boats, but not all. Many prosper in a bull market, but not everyone. In the most affluent country of history, there are still people in need of help and hope. And there are private and religious groups in every community willing to provide both - saving children from gangs, rescuing people from addiction, caring for women in crisis.
Yet it is not enough for conservatives like me to praise these efforts. It is not enough to call for volunteerism. Without more support and resources, both private and public, we are asking them to make bricks without straw.
Most of these groups depend on charitable contributions. Yet today 70 percent of tax filers cannot claim the charitable deduction, because they do not itemize. Under my plan, people who don't itemize will be given the same treatment and incentive as people who do, rewarding and encouraging giving by everyone in our society, not just the wealthy.
Finally, we must treat the elderly with dignity. Our "greatest generation" deserves our greatest respect.
This begins by keeping our word. We must protect Social Security benefits for those who receive them... reserve the Social Security surplus for Social Security itself... while giving young workers of today new options like personal retirement accounts. A reform that would strengthen the system and give workers a larger share in the economic growth of America.
Respecting seniors also means respecting their abilities. Our current system places little value on the economic potential of senior citizens, as if their productive years were just a fading memory. Under today's "earnings test," as it's known, many Social Security recipients who continue to work lose anywhere from 33 to 50 percent of their benefits. An effective tax rate of up to 70 percent.
I happen to know two senior citizens very well. And neither of them shows much inclination to withdraw from productive life. One of them, at the age of 64 was elected President of the United States. At 75, he jumped out of an airplane. Both today keep busy. But my parents are just one example of the millions of skilled and experienced seniors who still have a lot to offer their community and their country.
Congress has made some adjustments in this earnings test. My plan eliminates it entirely - a change that will help millions of seniors. The law should not hinder our seniors from making their own choices and working as long as they want - all while fully receiving the Social Security benefits they have already earned.
These five priorities - social mobility, middle class families, entrepreneurship, charity and the elderly - mark a very different direction from that of the current administration. It has increased the level of taxes. And the percentage of national income we now pay in federal income taxes is the highest since the Second World War, when America had eight million men under arms. Yet the President and Vice President insist that tax cuts are a "risky" proposition.
I do not accept the assumption that it is somehow "risky" to let taxpayers keep more of their own money.
What is risky is when politicians are given charge of a surplus. There is a strong temptation to spend it. And, in Washington, that temptation is overwhelming. A government with unlimited funds soon becomes a government of unlimited reach.
There are only two things that can be done with a surplus. It can be used by government, as the president proposes. Or it can be used by Americans, to save and build and invest. As you can see from this tax plan, I have made my choice. I choose the creation of wealth, over the care and feeding of government.
I am always amazed when I hear politicians say government cannot "afford" a tax cut. May I remind them that government does not "pay" for anything: The people pay for government. The question is not how much government can afford to give to taxpayers. The question is how much the taxpayers can afford to give to government.
Low tax rates are a powerful economic tool to promote a higher standard of living for all Americans. They can be the difference between renting or buying a home, paying or postponing a debt, saving for college or worrying you won't be able to help your children.
Yet I also believe in tax cuts for a another practical reason: because they provide insurance against economic recession.
Sometimes economists are wrong. I can remember recoveries that were supposed to end, but didn't. And recessions that weren't supposed to happen, but did. I hope for continued growth - but it is not guaranteed. A president must work for the best case, and prepare for the worst.
There is a great deal at stake. A recession would doom our balanced budget. It would leave far less money to strengthen Social Security and Medicare. But, if delayed until a downturn begins, tax cuts would come too late to prevent a recession. Putting more wealth in the hands of the earners and creators of wealth - now, before trouble comes - would give our current expansion a timely second wind.
Our times allow a substantial tax cut. Integrity requires that it also be a realistic and responsible tax cut.
My plan is realistic because it avoids meaningless 15-year budget projections. It is not based on inflated growth estimates.
It is easy to build false hopes with false numbers. But this is not daring, it is deception. It is not boldness, it is cynicism. And Americans see through it.
For me, tax cutting is not some abstract cause. I have a plan, but I also have a record. I have actually done the work of passing tax cuts. Of persuading Democrats and Republicans to join in the two largest tax reductions in Texas history - nearly $3 billion returned to taxpayers.
My tax cut plan for America is responsible because it sets priorities. It reserves all the Social Security surplus for Social Security itself. None of it will be used either for new spending or tax reductions. My plan balances the budget. It funds needed priorities, including defense and education. It reduces the national debt. And it ensures that the excess - the rest of the surplus - is returned to the American people, who earned it and deserve it.
These, then, are the basic ideas that guide my tax policy: lower taxes for all, with the greatest help for those most in need. Everyone benefits - while the highest percentage tax cuts go the lowest income Americans.
This plan is judicious in approach - using real numbers. And just in effect - helping real people.
I believe this is a formula for continuing the prosperity we've enjoyed, but also expanding it in ways we have yet to discover. It is an economics of inclusion. It is the agenda of a government that knows its limits and shows its heart.
For many years "sharing wealth" was a code word for redistribution - the project of government planners and social engineers. With the best intentions, they actually added to the sum of suffering.
My economic vision goes in the opposite direction. I believe our sustained prosperity now permits us to use the tools of the free market to promote the goals and values we share as a nation: Independence, accountability, faith in the good judgement of citizens, confidence in their ability to compete, and charity for those who cannot.
How fortunate we all are to live in an age and a country where effort is rewarded, freedom prized and opportunity shared. Now let us press on, making the most of this chance given to no other nation in no other time - building a country rich not only in goods, but in goodness, and not only the envy of the world, but its inspiration.