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 KNOXVILLE, Tenn.– The tax cut package pending in Congress is typical of recent proposals, offering something for everyone without much thought about what the changes do to the tax system.

 That view of the tax package was offered Thursday by Dr. Bill Fox, economist and director of the University of Tennessee-Knoxville’s Center for Business and Economic Research.

 “One of the characteristics of most tax reform proposals in recent years has been to make sure that everybody gets a beanie out of this,” Fox said. “That seems more important than to think about the logic of what we are trying to do with our tax system.”

 Fox said key elements of the package included tax credits for children and for college, as well as cuts in capital gains taxes and an increase to $500,000 in the exemption on home sales.

 “It hits a wide range of the U.S. population with most of the benefit accruing to higher income people,” Fox said. Fox said tax cut proponents have taken into account efforts to balance the federal budget and eliminate the deficit by 2002.

 A strong national economy generating increased revenues for the government, combined with some real spending reductions at the federal level, make talk of tax breaks seem more plausible, Fox said.

 “We have made extraordinary gains in reducing the deficit,” Fox said. “There is a deficit that to you and me seems like a large number, but as a share of GDP (Gross Domestic Product)is a very small fraction of what it was during the Reagan administration.”

 The desire to give taxpayers a break is not the only motivation behind the tax cut package, Fox said.

 “What we need to keep in mind is that at least the conservative part of the Republican Party wants smaller government. They want to balance the budget at a smaller size.”

 The one exception in the tax package that does not relate to smaller government is the proposed capital gains changes, Fox said.

 “A major issue of the Republicans has been capital gains tax cuts related to housing and general capital gains — this has been a major issue of Republicans for a long time. That issue almost is independent of the size of government issue.”


 Contact: Dr. Bill Fox (423-974-1697)