Class War in America: the Book
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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:
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: