Class War in America: the Book |
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Taxes,
Republicans, and
Working Americans Oookaayy.
In 1993, Clinton and the Democrats in Congress raised taxes on the top
1.2% of Americans, left the middle class largely untouched, and gave
economic benefits to low-income Americans and small businesses. Contrary
to Republican warnings, the economy not only grew, it grew so fast that
conservative economists complained that it might be
overheating. Beginning
in 1999, to the surprise and displeasure of conservatives everywhere,
wages of some low-income Americans began to creep upward for the first
time in 20 years. Naturally,
this led many of them to call for the Fed to slow economic growth by
raising the prime rate. This is the same crowd that convinced many
gullible voters in 1994 that they wanted to cut taxes on the rich so that
economic growth could speed up, thus raising wages. Since
Republicans couldn’t stand this hint of good news for average Americans,
they have been doing everything they possibly could to reverse the effects
of the 1993 legislation. Although their record has been consistent for the
past two decades, their tax proposals for the past five years reveal whom
they’re actually working for, and which “working Americans” benefit from
their policies. The
following excerpts clearly demonstrate how Republicans have conned the
voting public into supporting their scurrilous tax proposals
by §
artfully
covering up who benefits most from their proposed tax
changes, §
outright
lying about the regressive nature of specific tax changes on working-class
Americans, §
ignoring
the loss of necessary government services—which benefit mostly middle- and
low-income workers—when tax cuts for the wealthy reduce revenues,
and §
deliberately
causing the public to lose confidence in the Internal Revenue Service
itself. To
get an idea of the chronic Republican mindset when it comes to taxes,
consider how The Wall Street
Journal described the aura that surrounds the Republican strategy
about taxes. Under the head, “Anti-IRS Frenzy Gives Republicans a Chance
to Road-Test Plans,” it revealed how two Republican stars, Dick Armey
(R.-Texas) and Billy Tauzin (R.-Louisiana), tried to whip up voter support
for tax changes, via the flat
tax and/or the retail sales tax: The
flat tax would levy a single flat rate on individuals’ wages and business
cash flow, but exempt
individuals’ interest, dividends, capital gains and
inheritances. The retail sales tax would
get rid of the individual and corporate income taxes altogether, and levy
a large sales tax—Mr. Tauzin says 15%, but experts say it would have to be
much higher to cover anything close to the current cost of government—in
its stead. Both would have
characteristics that would be lightning rods for criticism. Both, for
instance, would lighten the tax burden on the best-off Americans and shift
the tax burden to everyone else.1 The
Republican tax strategy: Whip up anti-IRS sentiment so that the public
will be receptive to anything—no matter how absurd—as
long as it is a change. The only thing that could stop the flat and sales
tax scams is their transparent unfairness, which would become “lightning
rods for criticism,” that even The
Wall Street Journal predicted. In
either case, the Republicans’ real intent is to benefit the wealthy by
replacing a progressive tax system with a regressive tax system. Their
flat- and sales-tax proposals are so obviously outrageous, one wonders why
they didn’t stick to their more devious, yet effective, ways for screwing
working Americans. For
example, look at the budget plan they came up with in 1995. The Wall Street Journal gave the
true scoop about Republican day-to-day tax scheming, using non-exotic,
standard procedures. Under the head, “Figuring Winners, Losers in Budget
Plan of GOP Hinges on Tricky Judgments,” the Journal concluded that
The
poor will get little direct benefit from the tax breaks: The poorest
one-third of American children won’t benefit from the $500-a-child tax
credit because their parents don’t owe enough taxes to apply the credit
to. And furthermore, cutbacks in the earned-income tax credit will hit
some low-income families. And some provisions
benefit the wealthy almost exclusively, such as changes in the estate tax
that benefit only heirs to estates worth more than $600,000 and a phase
out of a luxury tax on cars costing more than
$32,000.… Nearly
$300 billion in reductions in projected spending would come from programs
aimed directly at poor and lower-income Americans—such as Medicaid, cash
welfare, and food stamps.2 The
Journal contrasted the results
of the tax cut proposals as reported by the Congressional Joint Committee
on Taxation, and the Treasury Department, which also included cuts in
corporate and estate taxes in their analysis.3
The
Congressional Joint Committee indicated that those making under
$30,000/year would get less than .4% (that’s four-tenths of a miserable one percent)
of the total tax cut. Those making $30,000 to $50,000 would get 28%, those
making $50,000 to $100,000 would get 49%, and those making over $100,000
would get 24% of the total tax cut. The
Treasury analysis indicated even greater benefits for the very wealthy:
Those making under $30,000 would get 1% or less of the total tax cut.
Those making $30,000 to $50,000 would get 12%, those making $50,000 to
$100,000 would get 39%, and those making over $100,000 would get a
whopping 47% of the total tax cut. The
only thing “tricky” about analyzing this Republican plan is deciding the
extent to which working Americans were getting
screwed: §
Remember
how Republicans say their tax cuts will help “working Americans”? By
either Congress’s or the Treasury’s analysis, those making under $30,000 a
year, or approximately 46% of Americans, would get 1% or less of the
benefits of the tax cut. §
On
the other hand, those making over $100,000, the richest 5.8% of families,
would get 24 to 47% of the benefits, depending upon whether you use
Congress’s or the Treasury’s numbers. §
And
those who choose to use the Congress’s figures have to omit two of the
most important benefits the wealthy would receive from the Republican tax
plan: cuts in corporate and estate taxes. Republicans, of course, believe
that the income people get from being born, or from effortless
investments, shouldn’t be taxed as much as income from manual
labor. As
the wise statistician once said: “Figures don’t lie, but liars can
figure.” Despite the “figuring” of Republican politicians, look at what
their figures actually meant for the working poor: §
The
$500-a-child tax credit—one of the most ballyhooed Republican gifts to
working Americans—ends up not touching the poorest third of American
children. The same could be said for cuts in luxury and estate
taxes. §
The
earned-income tax credit—designed to make up to working Americans for the
sacrifices forced on them by the new conservative economy—was reduced for
our lowest income families. §
Surprise.
Most of the reductions in spending in the Republican plan—to finance these
tax cuts mostly for the wealthy—would come out of the hides of those who
have suffered most from this new economy: working Americans who most need
the benefits of Medicaid, cash welfare, and food
stamps. The
Republican budget plan of 1995 clearly exposed their loyalty to the
wealthy. A look at more recent tax discussions shows how they con the
public into buying into their devious goals. It only takes a few wealthy
people—with the right connections—to change tax laws to their advantage.
The Wall Street Journal
described how “Washington Is Moving to Alter the Certainty of Death
and Taxes” by lowering the “death” taxes that only the top 1% Americans
pay: About
1% of Americans who die each year—31,564 in 1995—leave their heirs with
the burden of estate taxes.
Individuals with estates of less than $600,000 and couples with
estates of less than $1.2 million are exempted entirely.… Republicans are trying to sell the
idea of estate tax repeal as a populist one: the taxes, they argue are a
penalty on the American Dream of working hard to get rich.…
Mr. Lott acknowledges that
most of his…constituents won’t get hit by estate taxes. “But,” he says,
“just the idea of a death tax infuriates people in the real
world.”4 To
hear the Republican complaints about the onerous “death tax” on working
Americans, one would think that they were talking about average Americans. But only 1% of
our richest Americans are affected. However, because of the way our
Congress can be bought, that 1% can be influential enough to change tax
laws for our entire nation. When
Republicans cite the “American Dream” of getting rich through work, they
appeal to the strong emotions of most citizens. Yet their elimination of
the estate tax would mean that large numbers of people would become rich
by not working. All they would
have to do is be born, and then live like royalty for the rest of their
lives. Meanwhile,
to give them their tax break, Americans who truly work for their incomes
would have to make up for the lost taxes by paying more themselves. Even
in Republican Trent Lott’s own district, most people wouldn’t leave enough
money to their descendants to be affected. Of course, everyone dies, but only 1% leave
taxable estates. Therefore, Lott and his cronies appeal to the public
biases by referring to estate taxes on the wealthy as “death” taxes on
everyone. To
get an idea of the consistency of the Republican strategies, look at the
tax legislation discussions in 1997. The 1997 tax budget discussions
mirrored the discussions of 1995: Massive tax cuts for the rich, and
relatively few for the middle class and poor. The Wall Street Journal laid open
the fact that “Top Earners Will Get the Biggest Slice Of the Tax-Cut Pie,
New Analysis Shows”: Even
without effects of the estate tax, the Treasury analysis said 50.3% of tax
cuts would flow to the top 20% of earners—or families making at least
$93,222—by the time the full package takes hold by 2007.
In
fact, 14.4% of the cuts would flow to the top 1% of earners, or families
making $408,551 or more, and 21.9% to the top 5%, or families making
$170,103 or more, the Treasury estimated. The
share of benefits going to the top 5% is just slightly less than the 23%
of benefits going to the bottom 60% of earners, or families making less
than $54,758.5 Getting
monotonous, isn’t it? By sheer dogged persistence, Republicans are
determined to get their way with the American public. Year after year, by
chipping away at our formerly effective progressive tax system, they are
rewarding greed and penalizing genuine work. In reviewing these figures,
remember that the tax cuts are simply the more recent stages of a string
of benefits for the wealthy that have been occurring for the past several
decades. Chief
among them are the changes in economic policies, described in Part 1, that
tremendously benefited the wealthy and forced huge sacrifices on working
Americans. Now,
instead of making up for these past injustices, wealthy Republicans are
exacerbating them by cutting benefits and protections for those same
workers, and allocating the tax savings to
themselves. To
get a better idea of the extent of Republican hypocrisy and the actual
effects of recent tax changes, look at their propaganda—given in press
releases, speeches, and interviews—and the actual results of their tax
legislation. First, the
propaganda: The
Spin News
release by Republican National
Committee Chairman Jim Nicholson, July 1, 1997: I
am pleased President Clinton has finally made restitution to Americans for
imposing the largest tax increase in history in 1993, by joining with
Republicans in the effort to cut taxes.… However, Clinton is playing
a dangerous game by attempting to instigate class warfare in his rhetoric
charging—erroneously—that the Republican tax cuts favor the
rich. Haley
Barbour, (then) Republican National Committee chairman, August 8,
1996: We
are going to get into the real issues, and the first of those real issues
is taxes and spending. This will be a huge issue for three reasons. The
first is that lower taxes means more jobs and higher takehome
pay.… We Republicans know, if you
are concerned about take-home pay—stagnant incomes—the fastest and most
effective way to raise somebody's take-home pay is to cut their taxes.
This isn’t rocket science.… Republicans are for cutting
taxes. Bob Dole has proposed a 15 percent across-the-board tax cut because
we believe the people who work and earn the money ought to earn more and
keep more of what they earn. If they could keep more of what they earn,
they could do more for themselves. They could do more with their children,
their churches and synagogues and their communities. John
Rowland, governor of Connecticut, speech at the 1996 Republican
convention: All
across America, people are working longer and harder.
Americans are coming home to
their families tonight, trying to balance their checkbooks, and they’re
wondering: If I’m working so hard, why is it so tough to make ends meet?
Where does all the money go? …The average family now
spends more on taxes than it does on food, clothing and housing combined.
To restore the Dream for all Americans, we've got to dramatically reduce
the Government’s share of our paychecks. Rep.
John R. Kasich, ranking Republican on the House Budget Committee, “Putting
Families First: Why the American Dream of Financial Independence and
Security Turned Into a Nightmare of Taxes,” in Rising Tide, May/June 1994: High
taxes also rob families of the resources they need to care for their
children. Equally important, for many families, higher taxes have forced
into the workplace those parents who would prefer to stay home and raise
their children. That’s not what my father had in mind when he talked about
the American dream.… In addition to the
$500-per-child tax credit, our plan offered important changes in IRAs to help families save for
the future. The
1996 Republican Platform, Adopted August 12, 1996: BUILDING
A BETTER AMERICA American
families are suffering from the twin burdens of stagnant incomes and
near-record taxes. This is the key cause of middle-class anxiety. It is
why people feel they are working harder, but falling further behind; why
they fear the current generation will not be as successful as the last
generation; why they believe their children will be worse off; and why
they feel so anxious about their own economic
future. Newt
Gingrich, radio address on tax cuts, June 21, 1997, Washington,
D.C.: It
has been sixteen long years since the working American taxpayer had
something to cheer about. For sixteen years, taxes have increased,
government has expanded, bureaucracy has grown, and our weekly paycheck
has dwindled.… This is tax relief for every
taxpayer at every stage of life. It will help children and strengthen
families. It will ease the expense of an education and increase the number
of jobs. These tax cuts are targeted
to America’s working families and small businesses. A whopping 71% of
these cuts go to families making less than $75,000 per year. That’s real
tax relief for America’s middle-income working
families. Bill
Archer, Republican chairman, House Ways and Means Committee, press
release, July, 1999: The
American people will be the big losers if President Clinton vetoes our
commonsense plan to let them keep more of their own money. With each new
day and each new veto threat, it’s clear that all the President wants is
to spend the taxpayer’s money on more government programs. It’s too bad
the President seems more interested in hoarding excess tax dollars for
Washington bureaucrats rather than returning them to American families and
workers on Main Street. Republican
Sen. Phil Gramm, November, 1999 press release: What
our colleagues on the left would like to do, in following the president’s
proposal, is to take the tax cuts away from a working couple, both of them
working full time, making a total of $54,000 a year, and instead give it
to people who do not pay any income taxes. Sen.
Trent Lott, Republican Senate Majority Leader, Associated Press news
release, November 13, 1999: America’s
families don’t need higher taxes. They need a tax cut. America’s workers
deserve a tax cut. And America’s leaders should grant a tax cut.
Rep.
Tom DeLay, Republican Majority Whip, Republican press conference, November
18, 1999: We’re
very proud of what we’ve been able to accomplish over the past 5 years. It
is absolutely amazing. When I first ran for Congress, I wanted to…relieve
the tax burden on the American family. Rep.
J.C. Watts, House Republican Conference chairman, press release, September
1, 1999: I
trust that my constituents can do the right thing with their [tax refund]
money, and if they want to buy their kids school clothes, if they want to
buy a much-needed house-hold appliance, new tires for the car,
whatever—allow them the opportunity to spend their money the way they need
to spend it and not the way that Washington, D.C. would like to spend it.
Review
the comments of Republican leaders on the preceding pages. Can you see any resemblance between who the
Republicans say will benefit from their tax cuts, and who really benefits as disclosed in
the following excerpts of articles from our foremost con-servative
financial publications?
The
Reality of Republican Tax Cuts The
following excerpts, each from a separate article, describe the results of
enacted or proposed Republican tax legislation. The vast majority of
benefits obviously go to the special interests and the affluent—to those
who enjoy capital gains, and to those who are able to use a variety of
sophisticated financial and accounting procedures to take advantage of the
Republicans’ complex legislative provisions: “Tax
Bill Could Mean a Windfall for the Well Off …Don’t do anything yet, but start salivating. The tax bill passed yesterday by
the House of Representatives could turn out to be the biggest tax-saving bonanza in years for
upper-income Americans.… The Bill’s
Goodies: Capital-gains tax cut; Tax-exempt American Dream Savings
Accounts; $500-per-child tax credit; Rollback of higher tax on
upper-income Social Security recipients; Marriage-Penalty tax relief;
Bigger estate-tax exemption.”6 “The
[Republican] chairman of the House Ways and Means committee unveiled a tax
bill that provides smaller tax breaks for education and the working poor
than President Clinton wanted, and large tax breaks for estates and
capital gains.”7 “Estate-Tax
Relief: Guess Who Gets the Breaks? A sure way to win sympathy from
Congress is to cast two icons of the American economy—small businesses and
family farms—as victims of a rapa-cious federal government…. The trouble
is, the big winners from this rewrite of the federal estate-tax law would
be wealthy investors, not small-business owners or family farmers.”8
“Ready,
Get Set…Here’s How to Profit from a Big Cut in Cap-ital-Gains Taxes …The
gap [between capital-gains and ordinary-income rates] would create ‘an
enormous advantage to emphasizing capital appreciation over income,’ says
Thomas Ochsenschlager, a partner at Grant Thornton in
Washington.”9 “The
deep cuts in capital-gains taxes under the law signed yesterday by
President Clinton provide a bonanza to employees who are paid with stock
options.”10 “Rich-Poor
Gap in 401(k) Plans Widens …The gap between the rich and poor in 401(k)
plans is growing.… Of course, it isn’t a big shock that lower-paid workers
are less likely to participate in retirement plans. They may not feel they
can afford to;…they may not understand the plan…. The Labor Department’s
1993 Current Population Survey shows that 70% of the 2.2 million workers
earning more than $75,000 are offered a plan, while only 10% of the 15
million workers earning under $10,000 are offered a savings
plan.”11 “Where
There’s a Tax Cut, Wall Street Finds a Way …Just over two months ago, in
an effort to reward long-term investors, Washington enacted a cut in the
tax rate for long-term capital gains. Now Wall Street is already marketing
a device aimed at extending that same tax cut to certain wealthy investors
whose short-term trading gains weren’t supposed to benefit.”12
“The
Republicans are in danger of shooting themselves in the foot again with
the tax bill. They’re offering a $500-per-child tax credit but not to the
poorest working families, who need it most. The reason? The poor already
receive an Earned Income Tax Credit or a Child Care Tax Credit.
Conservatives figure these families get enough government money and want
to give the credit to higher-income families who need it less.”13
“Proposed
New IRAs May Benefit…Oops…the Rich …At first blush, the tax legislation
being debated in Washington, D.C. appears to offer a wealth of IRAs for a
broad swath of investors in a bid to bolster savings rates. But a look at
the fine print suggests that
the swirl of new IRAs could create opportunities primarily for
upper-income Americans to shift large chunks of their assets into tax-free
accounts where they would be beyond the reach of Uncle Sam. Forever.”14
“IRA
Loopholes for Rich Retirees Beat That Needle’s Eye …Starting this year,
affluent retirees are among those with the most to gain by putting money
into individual retirement accounts.”15 “More
Tax Breaks for special interests surface in the GOP tax-cut bill. Oklahoma
Sen. Nickles wins a provision to protect Excel Legacy in San Diego from a
proposed tightening of tax benefits of closely held real-estate investment
trusts. [more examples]”16 “Much
of Savings in GOP Tax-cut Bill Would Go to Those With Huge Estates …Much
of the savings in the $80 billion tax-cut bill before Congress would go to
taxpayers with huge estates, undercutting the Main Street image House
Republican leaders have promoted for the
measure.”17 “[Corporations]
indulge in tax shelters so complex government auditors can’t always
understand them. They shift profits to low-tax countries by manipulating
prices when doing business with their own overseas branches. And they take
full advantage of the tax breaks that Congress has awarded over the years,
while dispatching lobbyists to plead for still more.”18 “Tax
Bill Is a Boon for Corporate America; GOP Courts Business Allies on $792
Billion Package …It’s payback time for the business community, as
Republican leaders look for its support in the escalating partisan battle
over the massive tax-cut package cleared by Congress. Corporate America is
amply rewarded in the 10-year, $792 billion
bill.”19 “Sheltering
the Tax Shelters …Indeed, GOP tax bills include provisions that
tax-shelter critics say will expand tax-avoidance opportunities,
especially for multinational
corporations.”20 “House
Bill: Tax Cuts for You, Me, and Forestry …The polished marble hallways
outside the influential House Ways and Means Committee are filled with
well-heeled lobbyists, and the $863.9 billion tax-cut bill approved by the
committee this week shows once again the power of special
interests.”21 “To
the Campaign Contributors Go the Tax-Cut Spoils …The National Restaurant
Association asked for the moon in the tax bill. But, as one of their
lobbyists told the New York
Times, they got the ‘sun, moon and stars….’ As Senate and House
negotiators struck a final deal this week, they made sure to protect most
of the special-interest bonanzas for generous campaign
contributors.”22 “The
top 1% of households (average income of $833,000) would get tax cuts
averaging $20,697, according to Citizens for Tax Justice. The top 10%
would get 62% of all the tax relief. And the bottom 60%, those with
household incomes of less than $38,000, would get tax cuts averaging just
$99. And 48 million taxpayers would get no tax cut at all, according to
the Congressional Joint Tax Committee…. The GOP’s proposed [10%
across-the-board] tax cut would cost the Treasury nearly a trillion
dollars over 10 years.”23 “GOP Budgeteers Try to Delay Tax Credits to Poor …House Republicans are considering a plan to delay billions of dollars in tax credit payments to poor families to help offset spending elsewhere for education and social services next year.24 In
one way or another, for the past two decades, leading Republicans have
done everything they could to distract the voting public from the real
results of their tax legislation. Review the quoted comments of
Republicans described earlier. Note how they claimed they wanted to cut taxes
to benefit: §
“America’s
workers.” §
“Every
American taxpayer.” §
Those
whose incomes came almost entirely from “take-home
pay.” §
Those
with “incomes that have stagnated” for the past 20 years.
§
Those
whose work demands on both spouses take “time away from their children,
their churches and synagogues, and their
communities.” §
People
who wonder: “If I’m working so hard, why is it so tough to make ends meet?
Where does all the money go?”
§
Parents
who are forced to work and who “would prefer to stay home and raise their
children.” §
Families
who need help “to save for their future.” §
“Every
taxpayer at every stage of life.” §
“America’s
middle-income working families.” §
“Workers
on Main Street.” §
“A
working couple making $54,000 a year.” §
People
who “want to buy their kids school clothes, if they want to buy a
much-needed household appliance, new tires for the
car.” The
above words certainly describe the majority of voting Americans, which is
why the Republicans use them to describe their legislation. But their
actual legislation doesn’t come remotely close to giving such people any
appreciable benefits, and in many cases, it makes their tax burdens
worse—or reduces their governmental benefits. Taxes
in Perspective When
conservatives are confronted with these facts, they have a pre-planned
response: The rich deserve more of the tax breaks because they pay more
taxes to begin with. So far, their efforts to put a guilt trip on the
American public has worked. It shouldn’t. Don’t
sweat the fairness issue. To put taxes into proper perspective, look at Business Week’s frank explanation
of why the wealthy are paying so much in taxes. Under the head “Rich Man,
Taxed Man,” it recognized what we already know—that America’s richest are
paying the lion’s share of taxes. However, it went on to inject a little
realism into the issue: At
first glance, the data suggest that the wealthy are being asked to
shoulder an inordinate share of the tax burden.… The catch is that the rich
are getting a lot richer. The top 1% took in $524 billion, or 14.2% of
total adjusted gross income in 1992, up from 8.9% in 1982. Meanwhile, the income share of the lower
50% fell from 17.7% to 14.9%. Thus, the top 1% now rake in almost as much
as the entire bottom half of earners.25 The
kinds of numbers that conservative think tanks spew out to the public are,
indeed, “first glance” numbers, and they suggest that our country has
placed an inordinate tax burden on the wealthy. In absolute terms, the
wealthiest Americans pay, by far, the largest percentage of our nation’s
collected taxes. Superficially, to require 1% to pay 27.4% of all taxes
seems excessive. But, more importantly: §
The
conservative economic policies of the past 20 years are what enabled the
rich to get fabulously, incredibly richer, §
to
the point where, as of the time of this article, the top 1% took in as
much as the bottom 50% of earners. These are the more important numbers to
consider. They represent a deliberate, planned transfer of wealth from
working Americans to investors, business owners and corporate executives.
The
next time Republican politicians talk about the fairness of their tax
reduction proposals, remember: Regardless of how you slice it—no matter
how “unfair” it is to tax abused rich people—the members of the top 1% are
the ones who got rich from the conservative economic policies of the 1980s
and ’90s. And in the process, they forced huge sacrifices onto the bottom
40-80% of Americans who enabled them to become
wealthier. In
1983, the top 1% owned 31% of all wealth in the U.S. In 1989 it rose to
37%. At last count, they owned over 42% and their percentage was growing.
Something is going in their favor, and it sure as hell isn’t that they
work harder than workers do, or that they work harder than the wealthy did
prior to 1983. Now
look at the Republicans’ more recent strategy to transfer wealth from
workers to America’s richest: their attack on one of the most efficient
programs for workers yet devised—Social
Security. Now go to:
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