Nadler Responds to Bush Tax Cut Proposals

The following is a letter from Rep. Jerry Nadler (D - New York)

Congress no longer finds itself trying to reduce the federal budget deficit, but rather, looking for ways to spend the federal budget surplus. Although the Congressional Budget Office (CBO) predicts a non-Social Security surplus of about $3 trillion over the next ten years, Congress must look at these projections closely before it decides to spend the surplus.

First of all, the $3 trillion figure assumes that discretionary spending will only be increased to compensate for inflation, disregarding potential increases in spending for education and prescription drug benefits for seniors, among many other areas. It also does not consider supplemental spending which Congress approves annually and includes items such as emergency farm subsidies and disaster assistance. In addition, these assumed spending levels do not account for population growth, which will require increased spending, or any other needs that can't be foreseen today but will inevitably arise over the next ten years.

The CBO projections also ignore the fact that a large percentage of the surplus will be needed to shore up Social Security and Medicare so that our nation's senior citizens won't have to spend their retirement years without the basic necessities of life. Most importantly, we must realize that these projections are just that - projections, educated guesses. There is no way to guarantee these surpluses will actually materialize.

Adjusting the CBO estimates for the aforementioned realities brings the surplus down between $1.5 and $2 trillion. I believe that it is very dangerous to commit all of this money, which may not even materialize, to one initiative, as President Bush is proposing with his $2.1 trillion tax cut.

None of this means that a tax cut is impossible. It just means that a tax cut needs to be done in a simple, economically responsible way, giving every American a fair share of the prosperity dividend they have worked so hard to create.

The Progressive Caucus, of which I am a member, has proposed a very simple concept - the American People's Dividend. Under this plan, every man, woman and child would receive an equal amount of a fiscally-responsible portion of the surplus. For example, if that portion was determined to be $900 billion over 10 years, every single person - Bill Gates and the janitor who cleans his office - would receive roughly $320 a year.

Nearly 80% of Americans would fare much better under our proposal than under the President's plan. Under the Bush plan, a family of four making $35,000 a year would receive $450. Under our proposal each member of the family would receive $320, for a total of nearly $1,300.

Further, the amount available for tax cuts would be determined on a yearly basis, to avoid committing money that doesn't materialize. If the nation prospers, all of its citizens would reap the benefits, and if there's no surplus, there's no dividend.

Although a Democratic tax cut bill was considered on the floor of the House, there was no vote on the American People's Dividend. In the end, by a vote of 230 - 198, the House passed part of Bush's proposal, consolidating the five current tax rates into four new rates - 10%, 15%, 25%, and 33%. This bill has a price tag of $958.2 billion and is just one of several cuts proposed by the Administration and on the radar screen of the Republican party. The bill is now before the Senate for consideration.

Please be assured that I will continue to fight for a fiscally responsible tax cut that benefits all working families. Thank you again for conveying your views. Please do not hesitate to contact me in the future if I can be of further assistance on this or any other issue of concern.


Jerrold Nadler

Member of Congress