The surplus is big and getting bigger: from February to June 2000, the size of the surplus more than doubled. It's an election year and the candidates are licking their chops over the projected $1.9 trillion budget surplus over the next 10 years recently announced by President Clinton. That figure excludes money set aside for Social Security—the entire sum is fair game for the politicians and everyone wants a piece of the big pie.

Both Vice President Al Gore and Texas Governor George W. Bush have plans for the nearly $2 trillion windfall, but disagree over how much should be dedicated towards a tax cut and how much should be reinvested in other programs or used to pay down the national debt. Gore proposes using the surplus for a $500 billion tax cut and paying down the national debt, while Bush would use far more of the surplus—$1.3 trillion—for a tax cut.

Bush's tax plan focuses on cutting marginal tax rates. "My tax cut plan is not just about productivity, it is about people. Economics is more than narrow interests or organized envy. A tax plan must apply market principles to the public interest. And my plan sets out to make life better for average men, women and children," he says. In addition, Bush proposes to eliminate the estate tax and make the research and development tax credit permanent.

Vice President Al Gore supports a pro-growth, pro-savings, pro-working family tax cut that he says fits within a responsible budget framework to pay down the debt, save Social Security, and strengthen Medicare. Gore would create tax-free education savings accounts, ease the marriage penalty by raising the standard deduction for couples, and establish tax-preferred retirement savings accounts to complement the tax-free individual retirement accounts already in place.

On One Hand...

The U.S. is in the midst of its longest economic expansion and tax revenues are at a record high, leading to a budget surplus. Taxpayers have done their job funding the surplus and now it is time to give working Americans a break and return some of hard-earned money to them. Congress is already taking steps in the right direction to end the marriage penalty and death taxes. Further tax cuts will allow Americans to save for retirement or their children's education, or to reinvest their money in the market. If the federal government uses the surplus to fund new programs as the tax-and-spend liberals want, it runs the risk of over-expansion and putting the brakes on the red-hot economy.

On the Other Hand...

Tax cuts, from which the average American will not significantly benefit, are a waste of the surplus. A massive tax cut would break the bank. The country has far greater needs, including paying down the nearly $4 trillion national debt or shoring up ailing programs like Medicare. The funds could also be used to bring about some long-needed changes, such as providing health coverage for the uninsured, of whom there are nearly 44 million in America. Tax cuts tend to benefit the wealthiest Americans, while the lower and middle class are better served by a stronger Medicare or other social programs.

• To support the Civil War effort, Congress enacted the nation's first income tax law in 1862.

• In 1913, the 16th Amendment to the Constitution made the income tax a permanent fixture in the U.S. tax system. The amendment gave Congress legal authority to tax income and resulted in a revenue law that taxed incomes of both individuals and corporations.

• In 1981, Congress enacted the largest tax cut in U.S. history, approximately $750 billion over six years. The tax reduction, however, was partially offset by two tax acts, in 1982 and 1984, which attempted to raise approximately $265 billion.

• The Joint Committee on Taxation estimates that a 10 percent across-the-board cut in income tax rates would reduce tax revenues by $776 billion over the next ten years.

• The top 1.8 percent of taxpayers with incomes over $200,000 will pay 35 percent of all federal taxes in 2001 under current law. The bottom 70 percent of tax filers with incomes below $50,000 will pay about 22 percent of all taxes.

• Americans spent more money per capita in 1999 on taxes ($10,298) than on food ($2,693), clothing ($1,404) and shelter ($5,833) combined, according to the Tax Foundation.