Editorial: TAXES: A Victory.

Congress has just enacted the most pro-growth tax cut since 1981. The 1986 tax reform reduced tax rates but also included tax increases on capital. The 1997 tax cut focused narrowly on capital gains. The 2001 tax cut reduced tax rates, but did so over a painfully extended period. President Bush's latest tax cut, on the other hand, cut tax rates, taxes on dividends, and taxes on capital gains -- immediately. Not only did Bush get most of what he wanted from Congress; the capital-gains provision was an improvement on his original proposal.

The victory is all the more impressive given the missteps Republicans made on the way to achieving it. The administration did not prepare the ground for cutting taxes on dividends. While Bush, Dick Cheney, Treasury secretary John Snow, and commerce secretary Don Evans were tireless in arguing for tax cuts, they never made a particularly persuasive economic case for them. The plan made sense as a supply-side measure to increase incentives to work, save, invest, and allocate capital efficiently. But the administration thought it politically safer to talk about the money it would put in people's pockets -- opening the door to Democratic proposals that would put money in people's pockets by spending money rather than cutting tax rates. Bush's tactics are also open to question.

By insisting that Congress cut taxes by $726 billion for weeks after it was clear that figure was unattainable, he may have missed the chance to cut a deal for $550 billion in tax cuts. In the end, he got $350 billion. Sen. Bill Frist got a lot of heat for a fumble in negotiations with the House, and Rep. Bill Thomas, head of the House Ways and Means Committee, was criticized for obstinacy on the details of the tax package. But the result of all the wrangling was a solid ...