Another handout to the bosses...
By Lee Sustar | May 30, 2003 | Page 12
IT'S A bit of a boost for the economy, a few more bucks for workers--and a bonanza for the super-rich. That's the real impact of George W. Bush's tax cut, approved by Congress and set to be signed into law as Socialist Worker went to press.
While the measure is supposedly worth $350 billion, this is a fraud. The final price tag will run as high as $1 trillion if the legislation's "temporary" tax cuts are made permanent--which is exactly what congressional Republicans vow to do.
Households with incomes of $1 million will get $93,500 for the 2003 tax year, according to the Urban Institute-Brookings Institution Tax Policy Center. "Over the next decade, 27 percent of the tax cut--about the share that goes to the bottom 90 percent of the population--would go to these very high-income families, who comprise a mere 0.13 percent of the population," wrote economist and New York Times columnist Paul Krugman.
And that's just for starters. By cutting taxes on stock dividends from 38.6 percent to 15 percent, the new measures will encourage wealthy individuals to funnel their income through investments that take advantage of the new lower rates.
"The capacity of companies and rich investors to exploit, and sometimes create, tax loopholes appears almost unbounded," wrote Wall Street Journal columnist David Wessel. "Taxing one kind of income a lot more than another creates incentives for tax games. Eliminating or sharply reducing the tax on dividends, without making sure that companies pay taxes, can offer all sorts of opportunities to the tax-averse."
At the same time, taxes on capital gains--income from selling stocks that have increased in price--will be cut from 20 percent to 15 percent, the lowest rate since the Great Depression. Nearly three quarters of the benefits of the capital gains tax cut alone will go to the wealthiest 1 percent of taxpayers, according to Robert McIntyre of Citizens for Tax Justice.
Overall, more than two-thirds of the overall tax cut will go to the wealthiest 10 percent, while the half of all taxpayers who make $30,000 a year or less will get just 5 percent of the benefits, McIntyre's analysis found. Households in the middle 20 percent of income range will get an average break of only $217--chump change compared to the handouts to the wealthy.
Nevertheless, by increasing the deduction for children from $600 to $1,000 and reducing the marriage penalty, Bush is hoping that cash in voters' pockets will get him re-elected in 2004. And by injecting much of that money into the system by mid-summer, the tax cut could help stimulate an economy that's been stagnant for three years.
Likewise, the bill allows corporations to write off 50 percent of the cost of new capital investments. This might deliver a kick to the economy--but it won't be enough to boost growth to the levels needed to create jobs.
With a glut in goods and the factories that produce them, prices have been flat or falling--so there's relatively little incentive for business to invest and create new jobs. And of the 2.1 million jobs lost over the past two years, some 1.7 million disappeared since the passage of Bush's $1.35 trillion tax cut.
The legislation's $20 billion in aid to states with budget crises will only stave off disaster in the worst fiscal crisis since the Second World War. In fact, states are scrambling to raise taxes that will eat up much--if not all--of the tax break from the Feds.
House Minority Leader Nancy Pelosi (D-Calif.) was right to call Bush's claim that the tax cuts will create jobs a "hoax on the American people." Yet rather than say that the money used for tax breaks should go to providing a prescription drug benefit for Medicare or aiding those without health insurance, the Democrats rolled over and conceded that some tax cuts are inevitable. In fact, the Democrats' sharpest attack on Bush was that the tax cuts would worsen the federal budget deficit--a position that used to be held by conservative Republicans.
Budget deficits are inevitable when the economy is in recession or growing slowly. The question is whether the money will be spent on jobs, social programs, health care and other priorities for workers--or whether the lousy economy will be used to justify yet another giveaway to the rich.
No wonder that a Wall Street Journal/NBC News poll found that just 29 percent of people believe that "tax cuts are the best way to increase economic growth and create jobs," while 64 percent responded that there were "better ways." The Democrats didn't try to mobilize around these views because they accept the same pro-business framework as Bush and the Republicans.
And no major Democrat dared to argue that the billions pumped into the Pentagon's war machine could be used to meet the needs of workers and the poor . It's time to demand what working people need--better schools, jobs, health care for all--and tax the rich to make them pay.