If you make $1-million-plus a year, you’ll be happy with the Republican tax bill signed by President Bush May 17. You’re set to save another $43,000.
If you make $40,000-$50,000 per year, you’ll get $47 – enough for a tank of gas.
If you make less than $40,000, Bush’s tax plan promises you next to nothing.
Richard Greenstein of the Center on Budget and Policy Priorities summed it up: “This indefensible agreement provides a windfall for the most well-off but little or nothing for most other Americans, relies on budget gimmicks to help mask its long-term costs, and will further increase our already large and unsustainable deficits.”
At the same time, Congress is trying to permanently repeal the estate tax, which benefits fewer than 1 in 100 people (see People Before Profits column, page 7), and is considering other pro-business, pro-wealthy tax cuts.
The Bush tax plan is not a “tax cut” but a “tax shift.” Over five years it shifts $70 billion worth of tax burden away from wealthy taxpayers (and corporations) and onto workers and low-income people.
The ways it does this include a one-year extension of exemptions from the alternative minimum tax, a two-year extension of the low 15 percent tax rate for capital gains and dividends, expanded tax breaks for business investment in labor-saving equipment, and provisions allowing multinationals like GE and Citigroup to avoid taxes on certain income shifted overseas.
Federal revenue has fallen from 21 percent of gross domestic product in 2000 to 17.5 percent today. At the same time, federal spending has risen from 18.4 percent to 20.8 percent, fueled by Iraq and other military costs. The difference between income and spending is made up by borrowing. The government’s debt — $8.3 trillion and rising $2 billion per day — will be used for many years to come as an excuse to impose further cuts on programs that benefit the working class.
“There is no evidence that massive tax cuts create jobs, but there is considerable evidence that they contribute to economy-choking deficits,” said United for a Fair Economy.
Budget proposals being worked on in the Republican-controlled Congress all contain cuts to people-friendly programs and entitlements. The House plan would cut expenditures by $132 billion over five years. So more than half of these cuts — in things like help with college tuition and health care for the poor, elderly and disabled — will go to pay for this new round of welfare for the rich. Some Republicans, worried about the November elections, are balking at some of these cuts.
This $70 billion is on top of earlier tax cuts. For example, for dividends and capital gains tax cuts totaling about $50 billion over five years, $21 billion comes from this package, while the other $29 billion comes from previous tax bills.
To put it in personal terms, Bush received $26,204 and Vice President Dick Cheney received $1,093,937 from the tax cuts that were just extended as well as the other tax changes pushed through by their administration.
Extending the 15 percent tax rate on dividends and capital gains is of value almost entirely to the very rich. Dividends and capital gains are two forms of income from investing in the stock market (or in bonds, real estate or other financial instruments). Even for better-off members of the working class, almost all of their investments are in retirement plans like IRAs or 401(k)s. This tax cut does absolutely nothing for those holdings. The overwhelming bulk of this tax cut goes to the super-wealthy.
Dividends and capital gains are income that people get for doing absolutely nothing. Most of us are taxed at a rate between 33 percent and 36 percent (income and Social Security/Medicaid taxes combined) on our income, for which we work hard every day.
The wealth of the really rich is invested in stocks, bonds, etc. They get huge incomes from these investments. On this income, they pay federal income tax, but no Social Security tax. Without special treatment, their rate would be 35 percent. So the idle rich would pay the same tax rate as middle-income people who work for a living. This is bad enough — under any principle of fairness, the rich should pay a higher rate than everyone else.
But the Bush tax cuts, on top of some earlier ones, drop this investment income to a 15 percent tax rate — less than half of what we pay!
Senate Minority Leader Harry Reid (D-Nev.) made an apt comment: “The tax reconciliation bill giveaway on capital gains and dividends will do much more for Exxon Mobil board members than it will do for Exxon Mobil customers.”