Fiscal Responsibility and Tax Cuts(From a letter by Clifford Neuman to President Bush, Vice President Cheney, Senators Barbara Boxer and Dianne Feinstein and Congresswoman Jane Harmon sent on February 19, 2001.)
Much of the discussion on your proposed tax cut centers on hypothetical arguments and projections of how much of a surplus we have, and how if we give too much back it will lead to deficits and other problems.
We can solve this problem if we decide instead to base any tax cut on realized savings in the previous year. If we decide what the priorities are for any excess revenue and then allocate it when we know how much we have, we can eliminate all of the "funny math" that permeates so many of these discussions. It will also make it readily apparent what is happening with the money, and who it goes to.
Thus, we would start by deciding how any surplus is to be spent, (e.g. at least $X to paying down the debt and of the remainder, 1/3 more to paying down the debt, 1/3 to social security, and 1/3 to tax rebates). Calculate the amount for rebates for GFY 2001 after the books are closed and we know our revenues and expenses for GFY2001. Then calculate the credit due each tax payer as a function of their personal income taxes they PAID for calendar year 2000.
For anyone concerned that the rich might get more than their fare share of the rebate, you can even make the rebate regressive, e.g. X percent of the first $100,000 in taxes paid for CY2000, and 1/2 X percent of the remaining taxes paid in CY2000. This will still means that those that paid more taxes get a bigger rebate, but it would then be difficult for anyone to argue that the rebate goes disproportionately to the rich.
In calculating the rebate amount for CY2000, paid as a credit against CY2001 taxes, the variable X would be calculated after the books close on GFY2001, with knowledge of the total tax receipts for CY2000 and how they are distributed between those paying more than e.g. 100,000 in taxes and those paying less.
This rebate would be calculated by the taxpayer as a credit against the taxpayer's 2001 tax return using the value of X published by the government and using the taxes paid from the taxpayers CY 2000 return.
Separate to, but in addition to the rebate describes here, we should also simplify the tax code to eliminate the marriage penalty by removing the married filing separately tax bracket, and allow married couples to choose either married filing jointly, or filing separately using the single tax schedule.
Regarding the estate tax, I do not believe we should eliminate it, but we should raise the floor so that it affects fewer people, and we should allow estate tax on real estate for family held businesses to be deferred until the sale of the particular asset.
I hope that a plan like the one described above can be considered as an alternative to the plans currently under consideration, which are not very tolerant of errors in projected government income or expenses.