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UPDATE,
SUMMER 2001
Unfortunately, the struggle to
prevent Congress from granting an enormous tax cut to the wealthiest
taxpayers has failed. The final tax cut package returns hundreds of
billions of dollars to the rich, and at best a few hundred dollars each
to upper-income working people. The House passed the final bill on May
26 by a margin of 240-154, and the Senate cleared the bill the same day
by a 58-33 margin. Bush had barely signed the tax cut bill into law when
it became obvious that the massive tax giveaway to the wealthy has
eroded the federal budget surplus almost completely.
BACKGROUND
George W. Bush was the favorite candidate of the
corporate elite and the very wealthy individuals who financed his
several hundred million-dollar run for office. The quickest way for Bush
to repay these supporters is with a gigantic tax cut, compliments of the
U.S. taxpayers and Treasury.
Tax cut supporters claim that the tax money
that rich people no longer have to pay will be automatically invested in
new business, new plants, new equipment, and consequently new jobs will
be created. Proponents also claim that since the U.S. government is now
collecting a surplus of tax revenue, its time to slow down tax
collection. The problem is, this scheme was tried during the early years
of the Reagan regime, and as a result our country was plunged into debt
to the tune of more than $5 trillion! And to add insult to injury,
because of tax loopholes and low tax rates to begin with, wealthy
individuals in the U.S. are already some of the lowest-taxed rich people
on earth.
When George W. Bush held court in Austin, Texas, with the
leaders of big business back in January including GE CEO Jack Welch
these captains of industry reminded Bush that cutting taxes on
business and the wealthy was priority number one. Bush is working hard
to keep his promise.
CURRENT STATUS
The Bush Administration and Congressional Republicans
are floating a variety of tax cut proposals already, testing out several
schemes simultaneously (including one proposal that has already been
given approval in the U.S. House; Senate action is not expected to move
as quickly). It is already obvious that much of the total tax cut
probably more than $1.3 trillion over the next decade will end up in
the pockets of those earning more than $100,000 per year. The early Bush
plan includes a tiny cut for married couples making less than $12,000
per year, no cut at all for couples making less than $45,200 per year, a
small cut for couples below $109,250 per year, and large reductions for
those earning above $109,250 per year. Single taxpayers at lower income
levels will receive very little.
In addition to the discussion of tax
rate reductions, Republicans are pushing for changes to the tax code
affecting tax credits for children, the "marriage penalty,"
estate and gift taxes, charitable contributions, and the business
research tax. Even the Republicans admit that the business research tax
cut is a gift specifically targeted to big business. Many Democrats in
Congress are conducting both public and private negotiations with the
Bush Administration about the tax cut proposal, an unfortunate display
of opportunism and disorganization that does not bode well for the
chances of stopping or slowing the pace of or the size of the tax cuts.
The tax cut battle is likely to last well into the spring or even early
summer months.
UE POSITION
Our union opposes the reckless and unjustified
Republican effort to massively reduce taxes for the wealthy. Given the
ups and downs of our economy, a massive tax cut could plunge our country
back into a debt catastrophe akin to the Reagan fiasco of the 1980s. Our
unfair and insanely complex tax system should, however, be reformed to
provide for tax relief for working people. The system should also be
simplified and made progressive, meaning that those earning virtually
nothing pay nothing, and those earning the most pay the most. The
thousands of tax loopholes and tax shelters must also be eliminated,
compelling wealthy individuals and corporations to finally pay their
fair share of the tax burden.
TALKING POINTS
-
Why doesnt Congress use the budget surplus to
finance a desperately needed national health care program? Or use
"surplus" tax revenue to pay off the astronomical national
debt that was created by Ronald Reagan and George Bush back in the
1980s? Why on earth would we want to repeat the mistake of granting
a huge tax cut that might lead to another debt avalanche?
-
Instead of an enormous tax cut, why doesnt
Congress use the tax surplus to shore up Medicare, Social Security,
and make needed investment in our nations public schools? With
more than 5 million people in the U.S. now worth at least one
million dollars, is this a time to be expanding the ranks of this
privileged segment? Do these people need a tax cut?
-
The claim that rich people will invest their tax-cut
bonanza in areas that will produce jobs and new economic activity
doesnt hold any water. During the 1980s wealthy individuals
invested their tax cuts in all kinds of unproductive places such as
real estate speculation and interest-bearing government treasury
bills. Why do members of Congress constantly assume that wealthy
people always invest their money with great concern for how many
jobs it will create?
-
According to research done by Senate Minority Leader
Tom Daschle (D.,S.D.), the Bush tax cut will add up to enough to pay
for a new Lexus automobile for the highest tax bracket, enough to
pay for a used-car muffler for working people, and nothing at all
for those on the bottom.
-
Members of the Senate and House of Representatives
earn $141,300 per year. The leadership of both bodies earn
considerably more. Due to Congressional action in 1999, President
Bush receives $400,000 per year. And with virtually every member of
Congress and President Bush having sources of additional income,
this places every member of Congress in the tax bracket likely to
receive the biggest tax cut of all!
-
If Congress is determined to cut taxes on the most
wealthy segment of our society, would Congress be willing to
eliminate federal income taxes entirely on those earning less than
$20,000 per year? Why not?
-
Bush, like his father and Ronald Reagan before him,
promotes tax cuts as a convenient gift to wealthy supporters and
as a backdoor means to slashing federal spending that benefits
working people. When taxes are cut, revenue to the government falls,
leading to an inevitable belt-tightening. The huge cuts that gutted
the funding for the National Labor Relations Board in the 1980s were
engineered by the Reagan Administration when reckless tax cuts
increased the deficit.
(See also: Progressive Caucus Calls for Real Tax Relief
(UE News, February, 2001)
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