Don't count the tax-cut out yet

On other possible compromises that may come out of the House Ways and Means Committee, Hubbard would accept either a 50 percent dividend exclusion or taxing both capital gains and dividends at an 18 percent marginal rate. Actually, it would be 8 percent and 18 percent, since lower-income taxpayers would qualify for the lower rate for both cap gains and dividends. This is Ways and Means chair Bill Thomas' idea. Both a 50 percent exclusion and an 18 percent tax rate would provide powerful new incentives for growth.

In addition, a dynamic-scoring model of the president's tax-cut package is now with the National Economic Council, run by Steve Friedman. The model -- the work of Secretary of the Treasury John Snow, OMB Director Mitch Daniels and Greg Mankiw, the new chairman of the Council of Economic Advisors -- shows that the pro-growth impact of the tax-cut plan would reduce the revenue cost by 31 percent.

Noteworthy is the positive contribution from Mankiw, who has more supply-side blood in him than many supply-siders believe. Also interesting is the pending appointment of Princeton economic professor Harvey Rosen to the council. Rosen, a former Treasury official under Papa Bush, chaired the Princeton economics department for many years, and has developed important dynamic-scoring models that capture the growth effects of personal tax-rate reductions on small businesses. Rosen stood up in favor of former New Jersey Gov. Christine Todd Whitman's tax-cutting campaign in 1993.

It now remains for the administration to release its dynamic-scoring memo to assure senators on the Finance Committee of the immediate growth impact of the president's plan and to offset the watered-down CBO study of dynamic scoring that was recently released.

Putting this document in the public domain would also provide new economic-team members -- Friedman and Mankiw -- the opportunity to show their pro-growth bona fides. Having them weigh-in publicly with clear support of the president's plan could be persuasive for some fence-sitters in the Senate during the committee markup and the subsequent debate on the floor.