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ECONOMICS -
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Five years of Bush administration tax cuts help the super-rich get super-richer

Posted in the database on Thursday, April 20th, 2006 @ 20:25:24 MST (2234 views)
by Nicloe Colson    Socialist Worker Online  

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Death and taxes are supposed to be the only sure things in life. But thanks to George Bush, that statement is only half true for the super-rich. NICOLE COLSON looks at how the latest round of Bush tax cuts are lining the pockets of the wealthy.

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Though it won’t come as much of a surprise to anyone, a recent New York Times study of IRS data confirms that the latest round of tax cuts pushed through by the Bush administration was a giant boon to the already rich.

The Times found that, overall, the Bush administration’s tax cuts on investment income, approved by Congress in 2003, reduced taxes on those with incomes of more than $10 million by an average of $500,000 each. According to the Times:

-- Taxpayers with annual incomes greater than $10 million had total savings from both Bush tax cuts that nearly doubled in 2003, to more than $1 million.

-- Because of lowered tax rates on investment income, taxpayers with annual incomes more than $10 million paid about the same share of their income in income taxes as those making $200,000 to $500,000.

-- The 181,000 Americans with annual incomes of $1 million or more--about one-tenth of 1 percent of all taxpayers--reaped 43 percent of all the savings on investment taxes in 2003, about $41,400 per person.

--In contrast, the 71 percent of tax filers with incomes less than $50,000 saved $10 each from the capital gains and dividend tax cuts, adding only 2 percent to their $425 average tax reduction in 2003.

More than 70 percent of the tax savings on investment income went to the richest 2 percent of taxpayers, about 2.6 million people. Meanwhile, very few poor and working class people saw any benefit from the most recent wave of tax cuts. The bulk of “investments” held by working class people are retirement accounts, and these aren’t even eligible for the cuts. In fact, the tax break on dividends applies only to stock held outside of retirement accounts--most of which is in the hands of the richest 1 percent of the population.

According to the Center on Budget and Policy Priorities (CBPP), high-income households are receiving the largest tax cuts, by far, of any group.

Those in the top 1 percent income bracket are expected to get an average tax cut of $39,000 in 2006--or 52 times more than households at the middle of the income ladder. Those with incomes over $1 million will receive an average tax cut of more than $111,000.

Overall, says the CBPP, the Bush tax cuts have ensured that the top 1 percent of households paid a smaller share of their income in federal taxes in 2003 than they paid in any year since 1992.

And things will get even worse if the Bush administration gets its way. That’s because one key part of the Bush administration’s tax cuts--eliminating the estate tax--hasn’t gone into effect yet. The estate tax is due to disappear in 2010. When it does, since only estates bigger than $2 million, or $4 million for a married couple, are taxed to begin with, the vast majority of gains from estate tax repeal will go--once again--to the wealthiest 1 percent.

As Times columnist Paul Krugman commented, “[J]ust as administration officials continued to insist that the trailers were weapons labs long after their own intelligence analysts had concluded otherwise, officials continue to claim that most of the tax cuts went to the middle class even though their own tax analysts know better.”

Robert McIntyre, director of Citizens for Tax Justice, agreed. “Politicians who back the tax cuts on dividends and capital have consistently claimed that these tax breaks do not favor the rich,” he noted in a statement. “The new data from the IRS offers conclusive evidence that those claims are false.” He added, “Sadly, knowing the truth is unlikely to get these politicians to change their minds.”

The first round of Bush’s $1.35 trillion in tax cuts were a gift to his super-rich campaign contributors after he took office in 2001--with the richest 1 percent of U.S. taxpayers getting away with nearly half of the loot. In 2003, Bush came back for more.

At the time, the Urban Institute-Brookings Institution Tax Policy Center predicted that households with incomes of $1 million would get a break of $93,500 for the 2003 tax year alone--and that the final cost of the 2003 tax cuts, if made permanent as Bush and Co. have vowed, would top out at $1 trillion.

“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,” Krugman predicted in 2003, as the cuts were being passed.

Today, not only have the worst of these predictions come true, but ordinary people are being forced to make do with less and less of the things that matter. That’s because the Bush tax cuts have been--and will continue to be--paid for with sharp cuts to programs that working and poor families rely on.

The Bush administration’s latest budget-slashing demands include cuts in 141 domestic programs, including a $36 billion cut in Medicare spending for the elderly over the next five years. Bush has also proposed drastic cuts to Medicaid and Head Start, the elimination of $1 billion in child-care funds over five years, and termination of the Commodity Supplemental Food Program, which provides food assistance to low-income seniors, needy pregnant women and children.

According to data compiled by the National Priorities Project, the average $1 million tax break that went to just one of the super-rich taxpayers in 2003 alone as a result of Bush’s tax cuts could have paid for the annual salaries and benefits of 16 public school teachers; health care for a year for 126 uninsured people; or Head Start programs for 112 poor children.

But don’t expect the Democrats to push to repeal the Bush administration’s disastrous tax cuts. After all, they offered little or no opposition while it all happened. Asked in a recent interview if she would be in favor of repealing the 2003 tax cut on capital gains, Sen. Hillary Clinton (D-N.Y.) refused to answer--apparently out of fear of being labeled a “tax-and-spend” Democrat. Instead, Clinton said, we “have to look at the whole package.”

Looking at the “whole package,” however, shows that the tax burden in the U.S. has been systematically shifted onto the shoulders of the poor and working class. Today, according to Times reporter and author David Cay Johnston, tax cuts and loopholes designed to aid the rich mean that “the poor are taxed almost as heavily as the rich are--and even more heavily than the super-rich.”

It’s time the rich were made to pay their share.

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Who’s paying more than their share?

Are so-called “illegal” immigrants a drain on the economy? That’s what Republicans--and many Democrats--would have you believe.

The truth, however, is that undocumented immigrants pay far more into the economy in taxes than they ever receive in benefits.

As Francine Lipman, a professor at Chapman University’s law school has written, despite the right-wing stereotypes about undocumented immigrants, “each year, undocumented immigrants add billions of dollars in sales, excise, property, income and payroll taxes, including Social Security, Medicare and unemployment taxes, to federal, state and local coffers. Hundreds of thousands of undocumented immigrants go out of their way to file annual federal and state income tax returns.”

Economists estimate that undocumented immigrants pay an estimated $7 billion in Social Security taxes and $1.5 billion in Medicare taxes into the system every year--and they almost never are allowed to receive the services those taxes are supposed to provide.

As Lipman points out, “undocumented immigrants are barred from almost all government benefits, including food stamps, Temporary Assistance for Needy Families, Medicaid, federal housing programs, Supplemental Security Income, Unemployment Insurance, Social Security, Medicare, and the earned income tax credit.”

In all, according to one estimate by the National Conference of State Legislators, undocumented immigrants paid on average $1,800 in taxes in excess of their “cost” in government services.

“These hard-working ‘essential,’ but unauthorized, workers and their families are the growing population of the invisible working poor of America,” writes Lipman. “Nevertheless, they receive virtually no government assistance and cannot vote, but bear disproportionately higher effective federal, state and local excise, sales, property, payroll and income tax rates.”



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