Marginal tax cuts will help

The upcoming battle over President Bush’s tax-cut proposal promises to be interesting.

Most importantly, no one disputes the need for a tax cut. The economy has slowed dramatically, as anyone who runs a small business can tell you. There has been no substantial tax cut in almost 15 years, with the result being that government now consumes a bigger slice of the economy than ever before in our history. And death taxes continue to make it hard for small businesspeople to pass on their companies to children and family members who want to keep the business in the family.

So the argument isn’t about whether to cut taxes, it’s about how much to cut them.

Given the tie between Republicans and Democrats in the U.S. Senate, it’s also clear that Maine’s two senators – Olympia Snowe and Susan Collins – will have a significant impact on whatever is passed.

Here’s advice from one Maine businessperson who’s felt the economic slowdown. The president has a good, decent, thoughtful proposal and the best thing our two senators could do is support the bill as the president has written it.

The Bush proposal emphasizes cuts in marginal tax rates for all Americans. That’s good because it’s reductions in marginal rates that promote economic growth. The plan also doubles the child exemption, which will give much needed relief to families with children. And by reducing or eliminating the death tax and marriage penalty, the plan makes the tax code simpler and much more fair.

Where Sens. Snowe and Collins have the most impact, however, is in resisting the special interests in Washington that want to turn this tax bill into a Christmas tree with all kinds of loopholes and costly, narrow provisions that benefit one group of interests – usually big corporations – over everyone else.

It’s important to recognize that the tax cut is actually quite modest when you consider that it’s phased in over years and the $1.6 trillion price tag covers a 10-year period. And given the speed with which we’re paying down the national debt, a strong case can be made that President Bush’s tax proposal is the minimum that should be enacted, not the upper limit.

Our senators should also stick to this simple principle: Tell us what you’re going to do and then do it. But don’t add qualifiers, triggers or other sorts of gimmicks that fog up the intent of the bill. Businesses and individuals like certainty – it helps us plan our family and business budgets better.

The constant tinkering with the tax code has been one of the biggest frustrations over the past two decades. It benefits no one except for accountants and tax lawyers, and Sens. Snowe and Collins should resist the temptation (that all politicians seem to have) to micro-manage the economy and set conditions on our behavior. Pass the tax cut and then let American workers and entrepreneurs work their wonders.

Maine’s last recession was a painful one. We don’t want to experience that again and if the federal tax policy can help us avoid it then Congress should act swiftly to cut taxes now. Maine families and small businesses need and deserve this tax cut. They’re the ones who work hard and play by the rules, and they’re the ones who have generated most of the new jobs in Maine during the past decade.

Our elected officials should reward the people who create jobs and who deserve incentives, and resist the temptation to keep the lion’s share of the surplus in Washington, where it will only be wastefully spent.

Douglas A. Farnham is the president of Getchell Bros. Inc. of Brewer.