TAX-CUT BILL IS SIGNIFICANT STEP FOR THE NATION

Backed by 12 Senate Democrats and all but two Republicans, and beating his self-imposed deadline of Memorial Day, President Bush has won passage of the signature legislation of his first year in the White House: A major tax cut.

The importance for him and for the country can hardly be over-estimated. This is the first significant reduction in marginal tax rates in 15 years.

As economist Larry Kudlow of CNBC and National Review put it: "That's a long time between haircuts, and a trim was badly needed."

This tax-cut bill is a small but significant step in reversing the last two tax increases of George H.W. Bush (1990) and Bill Clinton (1993).

Key facts are that, in the final version of the legislation awaiting President Bush's signature, the highest marginal rate is coming down to 35 percent, even lower than the 36 percent passed by the Senate.

Kudlow explains:

"Even more, the final bill repeals the phase-out of personal exemptions and itemized deductions for upper-income taxpayers, which effectively reduces the top rate to 33 percent. That means taxpayers (and unincorporated small businesses) will keep 67 cents out of each extra dollar earned, rather than the 60-cent take-home rate at today's 40 percent top bracket. ... The new take-home rate is therefore 12 percent better than the old retention rate."

With all the compromises necessary to get the bill through a narrowly divided Congress, many commentators have noted that the adopted legislation is far from Reaganesque.

Among other things, too much of the bill is back-loaded, with too much relief not taking hold until several years from now.

There is no cut in the capital-gains tax, reduction of which would be the most immediate spur to the animal spirits that fuel our economy and ignite the stock markets.

(Memo to Washington, and to the Bush White House: Why not immediately follow passage of this bill by moving to cut this punishing tax on America's seed corn, and watch the markets take off?)

There can be no question that much remains to be done in the way of simplification and radical tax reform.

Still, don't miss the key point: Somewhere between $1.3 and $1.8 trillion of your overtaxed earnings won't be left in Washington for the politicians to spend. It's coming home to you, to hardworking Americans.

As we look forward to the next tax-cut battle -- and the next, we're confident these Americans can spend, save and invest that money far better than the politicians ever will.

Kudos to George W. Bush.