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June
13, 2003
David
Vest
Bush
Roadmap to What?
Ron Jacobs
The Iranian Revolution, Reloaded?
John
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June
14, 2003
The US Tax System
Rigged
in Favor of the Rich
By LEE SUSTAR
The controversy over the exclusion of 6.5 million
low-income families from the increased tax child credit highlights
the anti-worker agenda reflected in George W. Bush's tax cut
passed by Congress in late May. Congressional Republicans claimed
that increasing child credits to such families would have exceeded
the supposed limit of $350 billion in the tax reduction, so
they left it out of the final bill.
But the cost of these credits would be
just $3.5 billion--just 1 percent of the total cost. Moreover,
if congressional Republicans make good on their vow to make
the tax cuts permanent, the final price tag will reach nearly
$1 trillion--compared to which the cost of the low-income child
tax credit is virtually nothing.
Last week, House leaders said they won't
add a low-income child tax credit unless the credits are made
permanent--and expanded to include families with incomes up
to $189,000. Yet this is only a small example of way the Bush
tax cut rewards the wealthy at the expense of workers and the
poor.
According to Citizens for Tax Justice,
more than two-thirds of the benefits of the tax cut will go
to the wealthiest 10 percent. Those who earn $30,000 or less--a
little more than half of all taxpayers--will get just 5 percent
of the benefits.
Over the next decade, the richest 1 percent
will get 27 percent of the benefits of the tax cut--the same
share as the bottom 90 percent. But George W. Bush is hoping
that workers will gratefully pocket an expected $400 tax refund
per child dependent this summer and a few more bucks next April--and
won't notice this colossal ripoff.
* * *
The "stimulus"
fraud
THE TAX cut will give the economy a boost
by injecting cash into the economy and increasing demand--but
not by much. First, the benefits are overwhelmingly skewed to
the already wealthy, who will bank or invest virtually all of
their gain.
By contrast, the working class and even
the middle class have just a tiny fraction of such wealth, and
therefore tend to spend a much larger proportion of whatever
gains they get from lower taxes. The more taxes are progressive--that
is, shift wealth to low and moderate income people at the expense
of the wealthy--the greater the immediate impact on the economy.
The Bush tax cut does the opposite. For
example, the new low 15 percent tax rate on dividends and capital
gains from stocks will lead to new tax shelters for the super-rich--such
as creating paper corporations to pay out income as dividends
at less than half of the top income tax rate of 35 percent.
Even the accelerated tax write-off for
corporate capital investments isn't likely to spur the economy,
given that the lowest interest rates in 40 years haven't induced
business to invest yet. Capital spending won't pick up as long
as a glut of excess capacity in products and factories keep
prices flat and profits weak. Finally, the increase in state
taxes, compelled by the worst fiscal crisis since the 1940s,
will eat up at least half of the stimulus provided by the federal
tax cut, according to Mark Zandi of the Web site Economy.com
* * *
Furthering the right-wing
agenda
THE REAL significance of the tax cuts
is that they "further Republican conservatives' long-term
goal of radically restructuring the income-tax system,"
the Wall Street Journal observed. The Bush program recalls the
1920s, when Republican presidents and congresses slashed the
tax rate for the wealthiest from a First World War peak of 77
percent down to 25 percent.
Higher income tax on the wealthy paid
for much of the New Deal social programs during the Great Depression
of the 1930s, with the top rate reaching 79 percent by the end
of the decade. The maximum rate went even higher during the
Second World War and again the early years of the Cold War.
After Democratic President John F. Kennedy
cut the top rate from 91 percent to 77 percent, it was reduced
to 70 percent and remained at or above that level until the
election until Republican Ronald Reagan was elected in 1980.
Reagan slashed the top income tax rate to just 28 percent.
The resulting budget deficits pressured
the first Bush administration to raise taxes, and former President
Bill Clinton raised the top rate to 38.6 percent in 1993. Yet
the increased tax revenues weren't used to increase social
spending, as they were in the 1930s.
Instead, Clinton embraced the old Republican
program of paying down the federal budget deficits through budget
cuts, shrinking the federal government to its smallest size
since the early 1960s. Moreover, Clinton's tax increase on the
rich didn't reverse the regressive trends in federal tax policy.
Crucially, the share of federal revenue
from social insurance payroll taxes has risen from 19.5 percent
in 1966 to 34.9 percent in 2001. Over the same period, federal
revenue from corporate taxes has dropped from 23 percent to
just 7.6 percent. The result is that Americans have "the
lowest corporate taxes in the world--and far fewer social services"
than in Europe, according to Robert McIntyre of Citizens for
Tax Justice.
Thus while the overall level of taxation
has remained stable over the last 40 years, the burden has shifted
steadily to the working class. This fueled the Republicans'
anti-tax, anti-government election appeal over the last 25 years.
The result: "Republicans gain control
of the national agenda through tax cuts that drain the Treasury,"
wrote Paul Starr in the June 1 issue of American Prospect. "Then,
trying to prepare the ground for new initiatives, Democrats
enact responsible tax increases that hurt their own popularity,
leaving them unable to carry out their positive agenda and
setting the stage for a fresh round of tax cuts."
"Ultimately the Republican strategy
unravels, as no government can keep cutting taxes and raising
military spending indefinitely," Starr continued. "But
by the time the Republicans lose an election, there's no money
to spend, and conservative policies are effectively locked in."
"Locked in," that is, because the Democrats are tied
to the same corporate interests as the Republicans and embrace
"fiscal responsibility" and eliminating the budget
deficit even as the GOP burns up money on tax cuts and military
spending.
"The Republicans make no bones about
the fact that they will do whatever they can to get rich people
more money," says Dean Baker, co-director of the Center
for Economic and Policy Research. "But the Democrats are
not anxious to be seen as advocating policies that would upset
corporate lobbyists." That's why the Bush administration
is getting away with its plan to engineer a fiscal crisis with
massive budget deficits that will be used to justify cuts in
Social Security, Medicare, Medicaid and more.
* * *
What taxing the rich
could achieve
In a recession, federal budget deficits
are a given. The question what kind of government spending and
tax cuts will take place.
The truth is that increasing social spending--funded
through higher taxes on the wealthy--can provide a powerful
economic stimulus. By restoring the corporate income taxes to
their early 1960s levels, for example, the government revenues
could increase by some $260 billion a year--enough not only
to fund a Medicare prescription program, but to fund universal
health care, according to an estimate by Baker. And if taxes
were increased on the wealthy, Social Security benefits could
be expanded.
Of course, such changes won't come through
routine lobbying and politics as usual. It will require a mass
movement that's capable of putting real pressure on politicians--and
taking the kind of action that can make it happen. That won't
happen overnight. But the furor over the child tax credit scandal--and
the bitterness over Washington's pro-business policies--shows
the potential to organize and fight back.
Lee Sustar
writes for the Socialist
Worker. He can be reached at: lsustar@ameritech.net
Yesterday's Features
David Vest
Bush
Roadmap to What?
Ron Jacobs
The Iranian Revolution, Reloaded?
John
Chuckman
The Man Who Wasn't There
Jason Leopold
Six Months Before War White House Silenced Critics of WMD Intelligence
Michael
Leon
Missing Weapons, Shrinking Bush and the Media
Negar Azimi
Ashcroft's Cruel Version of America
Saul
Landau
Shiite Happens
Hammond
Guthrie
Then and Now
Steve
Perry
Bush's Wars
Web Log 6/13
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