A commentary by E. J. McMahon, a senior
fellow at the Manhattan Institute, was published on October 19, 2000 by the Wall Street
Journal. The article is entitled "What Bush Should Have Said About Tax
Cuts." The following is a summary of what Mr. McMahon had to say.
McMahon opens his article by suggesting that the question posed by
Lisa Key near the end of Tuesday night's presidential campaign debate amounted to a high,
hard one for Al Gore and a slow, hanging curve ball right down the middle of the plate for
George W. Bush. Gore twisted and ducked; Bush checked his swing and fouled it into the
"How will your tax proposals affect me as a middle-class, 34-year-old single person
with no dependents?" Ms. Key asked.
The question was directed first at Gore. McMahon says that Gore proceeded to
misrepresent his own Retirement Savings Plus (RSP) plan.
Here is what Gore told Ms. Key:
"If you make less than $60,000 a year and you decide to invest $1,000 in a savings
account, you'll get a tax credit which means, in essence, that the federal government will
match your $1,000 with another $1,000. If you make less than $30,000 a year and you put
$500 in a savings account, the federal government will match it with $1,500. If you make
more than $60,000 and up to $100,000, you'll still get a match, but not as generous."
McMahon says that in fact, as a single person, Ms. Key would not be eligible for any tax
credit under Gore's plan if she earns above $50,000. If she earns between $30,000 and
$50,000, she could receive up to $500half of what the vice president implied. She'd
get a $1,000 credit only if she earns less than $30,000and she'd be eligible for
$1,500 only if she earned less than $15,000, at which point she presumably would not
consider herself "middle class."
When Bush's turn came, he assured Ms. Key: "You're going to get tax relief under my
plan." But then, as McMahon points out, Bush digressed into a discussion of Medicare
and, oddly, foreign policy.
According to McMahon, "Bush missed an opportunity to set the record straight on an
aspect of tax cuts that his opponent habitually misrepresentsthe implication that
"middle class" taxpayers would fare better under the Gore plan. If Mr. Gore is
going to insist on counting RSP as a tax cut rather than the income transfer program it
actually is, then Mr. Bush is entitled to combine his income tax cut with his proposal to
let workers control and privately invest up to 2% of their income, which is now part of
the payroll tax for Social Security."
Viewers of the debate were not told what Ms. Key makes. But
McMahon says that only if she earns below $30,000 does she do better under Mr. Gore's
planand then only if she can save $1,500 toward her retirement. But whatever her
current salary, Ms. Key undoubtedly has aspirations to do better in the future. This is
where McMahon says the Bush plan really becomes significantfor the more Ms. Key
makes, the more she will pay in income and Social Security taxes, and the more she will
save under Mr. Bush's plan. Under Gore's plan, McMahon says it's just the reverse. As her
income rises, her matching retirement credit will fall. And once she makes $50,000, she
gets absolutely no tax relief.
McMahon says that Ms. Key could do better only if she is in one of Al Gore's favored
classesif she cares for a relative with advanced Alzheimer's disease, for example,
or if she purchases her own health insurance policy.
McMahon concludes by saying: "In the long run, the Lisa Keys of
America would do far better with a Bush tax cut. Sometime between now and election day,
Mr. Bush should let them in on this secret.