Joe Cassidy ... The New Yorker Bush Tax Code

Most people already know that Bush's tax cuts favored the rich, but the size of the giveaway was startling. Based on figures contained in a recent study from the Congressional Budget Office, it now appears that about two-thirds of the benefits went to households in the top fifth of the income distribution, and about one third went to households in the top one-hundredth of the distribution. To put it another way, families earning $1.2 million a year-that is, the richest one per cent in the country-received a tax break of roughly $78,500. Families earning $57,000 a year-middle-income families-got a tax cut of about $1,100.

Even these numbers, though, do not convey the full ambition of the Republicans' agenda, which potentially involves a historic restructuring of the American system of government. Roughly two-thirds of taxable income is paid to workers in the form of wages and benefits. The other third goes to reward capital, or accumulated savings, in the form of corporate profits, dividends, and interest payments. If Bush's economic agenda was fully enacted, the vast bulk of these payments wouldn't be taxed at all, and labor would end up shouldering practically the entire burden of financing the federal government. In a new book, "Neoconomy: George Bush's Revolutionary Gamble with America's Future," Daniel Altman, a former economics reporter for the Times and The Economist, describes what such a system might look like. "The fortunate and growing minority who managed to receive all their income from stocks, bonds and other securities would pay nothing-not a dime-for America's cancer research, its international diplomacy, its military deterrent, the maintenance of the interstate highway system, the space program or almost anything else the federal government did. . . . Broadly speaking, that fortunate minority would be free-riders."

A return to the Victorian world of renters and laborers may seem like an outlandish scenario, but a generation ago it would have been difficult to imagine a White House, even a Republican one, phasing out the inheritance tax, which affects only a tiny minority of the richest families, and slashing the taxes on dividends and capital gains, which few middle-class families pay, either. The people who devised these policies simply do not accept the old rules. Glenn Hubbard, for instance, told me that the progressive income tax "discourages entrepreneurship and risk-taking. We have to trade off our interest in fairness with those costs. I, like many conservative economists, care a lot about progressivity at the bottom. President Bush, for example, made the Earned Income Tax Credit"-a handout to low-income families-"more generous. But progressivity at the top? I don't know. That just sounds like envy to me."

Language like this won't figure prominently at the Convention this week, at least from the podium, but should Bush win in November it is sure to reappear, as the conservative institutes and right-wing lobbying groups continue to promote their agenda, which now includes cutting the dividends tax and the capital-gains tax to zero, getting rid of the corporate income tax, and halving the size of federal spending, from twenty per cent of G.D.P. to ten per cent. "Here's the bottom line of it," Stephen Moore said. "The Republican Party is now a supply-side party. It's a tax-cut party, thanks to people like Grover Norquist and the Club for Growth. We've pushed it in that direction. It has evolved over the past forty years from being a party of Eisenhower balanced-budget Republicans into a party of Reaganite pro-growth advocates.

"That strategy is not just better economically; it also has political benefits, because, in my opinion, nobody lost an election in the past twenty years because of budget deficits. You couldn't point to a single congressional race where a candidate lost because of a big budget deficit. People might say in the polls, 'Oh, yes, I'm very concerned about budget deficits.' But does it change people's voting patterns? No."