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News :: Economy |
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Tax Cut Continues "Class Warfare" |
Current rating: 8 |
by Mark Weisbrot
(No verified email address) |
26 May 2003
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The Bush team cries "class warfare" when anyone questions why the well off and the super-rich need the tax code revised yet again in their favor. But what has been going on for the past three decades? From 1973-2001 the wages of a typical worker grew by about 7 percent -- almost nothing, as compared to the nearly 80 percent increase during the first half of the post-World-War II era. |
At a recent staging of one of President Bush's speeches, White House aides asked members of the audience to take off their ties. These people would appear as background for the President's attempts to persuade the public that his latest round of tax cuts would primarily benefit ordinary people, and they needed to look the part.
Backstage is another reality. One third of American taxpayers will get nothing from this tax cut, and more than half will get less than $100 for the year. Nor will the tax cuts provide much of a stimulus to the economy, which could really use one right now.
But this legislation was not designed to jump- start the economy, nor to help distressed families. The purpose is to rewrite the tax code so as to shift even more of the nation's income to the richest taxpayers.
This is easy to see: if economic stimulus were the goal, you would want to increase spending in the economy. That means now, not two or three or ten years from now.
So there is no need to rewrite the tax code, and create future deficits when the economy doesn't need them. A much more effective stimulus would be for the federal government to help the states. State and local governments are cutting back health care spending, laying off employees, even shortening the school year in a tragic attempt to balance their budgets. The shortfall is expected to exceed $100 billion over the next year.
The Senate added to the tax bill some $10 billion of aid to the states for each of the next two years, but that is not nearly enough to stem the bleeding. The administration had other priorities: getting rid of the tax that stockholders pay on dividends.
"If you're a teacher, you own equities," said President Bush. "If you're a policemen, you own equities." Maybe so, but the vast majority of people that hold stock-- including teachers and policemen -- do so in retirement accounts. So they will not benefit from the proposed dividend tax cut, since they will still have to pay taxes on their accumulated dividend income when they withdraw their money for retirement.
The dividend tax cut will therefore go overwhelmingly to upper-income households. Not surprisingly, the whole tax package is skewed toward the rich: between 19 and 23 percent of the money will go to the four-tenths of one percent of taxpayers who make more than $500,000 a year.
No fantasy appears too wild to be included in the marketing scheme. When asked about how the tax cut would affect the Federal budget deficit, Treasury Secretary John W. Snow replied "Well, it's actually going to be lower." But it's hard to find an economist even among Republicans -- who believes this "Voodoo Economics," as President Bush's father aptly named it.
The Bush team cries "class warfare" when anyone questions why the well off and the super-rich need the tax code revised yet again in their favor. But what has been going on for the past three decades? From 1973-2001 the wages of a typical worker grew by about 7 percent -- almost nothing, as compared to the nearly 80 percent increase during the first half of the post-World-War II era.
In other words, the gains from economic growth have all been going to the upper half -- and mostly to the upper 10 or 20 percent. A continual, one-sided "class warfare" has plagued this country for the past 30 years. This latest tax cut is just one more battle in that war, but it certainly won't be the last.
Mark Weisbrot is Co-Director of the Center for Economic and Policy Research, in Washington D.C. (www.cepr.net) |
See also:
http://www.cepr.net
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Bush Makes Poor Pay For Military Might And Tax Cuts |
by Julian Borger
(No verified email address) |
Current rating: 0
27 May 2003
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Harrah, Oklahoma
School was definitely over for Sally Kelly last week. The Oklahoma primary school teacher was trying to cram years of accumulated experience and memories into a few cardboard boxes and get them out of the door before the building was locked up for the holidays.
Thousands of teachers across the state and the US have been doing more or less the same thing in the past few months, squeezed out by a combination of recession, tax cuts and record military spending. Oklahoma is cutting 6,000 teaching jobs in the financial year just ending and the next, and the budgetary outlook is grim. But for Ms Kelly, there is more at stake than losing her vocation. Her breast cancer is in remission but still requires monitoring and medicines. Without the health insurance that came with her job, she can afford neither.
"For me, it's a life and death situation," she said, sitting in the deserted classroom, her head covered by a yellow turban to hide the effects of chemotherapy.
After surgery, a tube was inserted under the skin just below her collar bone to serve as a "port" for the chemotherapy, but she can no longer afford the drugs to keep it open, and she thinks she will probably have to get it removed. In a wealthier state in better times, some of her treatment might be covered by Medicaid, the national health insurance scheme for the poor. But the scheme is facing its own budget crisis, and the poverty threshold for eligibility is constantly rising. Ms Kelly is jobless but owns her home so may still not be poor enough.
Once her boxes are filled, all that remains is to remove the inspirational slogans with which she decorated her classroom. The last to come down says: "Attitudes are contagious. Is yours worth catching?"
She is determined to remain upbeat. This is a "detour not a roadblock" she says, but the truth is that her chances of finding a new teaching post soon are small.
Oklahoma's job cuts are part of a deep nationwide retrenchment eating away at the public sphere. According to some analysts, the states, which control most public services, are going through their worst crisis since the Depression. While the US is at the zenith of its global power, its health and education systems would be grounds for a scandal in poorer countries.
The Oklahoma Education Association reports that secondary-school class sizes are in the 40s and heading for the 50s. Oregon is closing its schools several weeks before the end of term and laying off public prosecutors to balance its budget. Missouri has ordered every third light bulb to be removed from official buildings to save money.
As a result of the cuts, 275,000 fewer Texan children will receive health care, and in Nebraska almost 25,000 low-income mothers have lost medical cover for their families because eligibility thresholds have been raised. Over this year and next, 1.7m Americans risk losing their health insurance.
The Bush administration argues that this is a crisis of the states' making. It says that during the Wall Street boom of the 1990s state governments expanded their budgets with the proceeds of capital gains and other property taxes. Now the boom is over, they will have to scale back. President Bush initially refused to bail out the states, but the Senate forced him to set aside $20bn (£12.5bn) in rescue money as a condition for agreeing last week to a $350bn tax cut. The money would have been almost enough to close the shortfall in this financial year but it will come too late to help sacked teachers such as Ms Kelly. And the package falls well short of the states' needs next year. Meanwhile, the federal government has piled spending obligations on the states without commensurate funding.
The terrorist alerts require constant overtime by state troopers and medical teams, but there is no budget for them. Worse still are the requirements of George Bush's 2001 education act, optimistically entitled No Child Left Behind. After the rhetoric of the public launch had died away, the program was cut off from funds, which went towards the administration's two leading priorities - tax cuts and defense spending. Oklahoma officials believe the No Child Left Behind scheme is up to 40% underfunded. State schools face rigorous tests without the money to pass them. Schools that fail face their staff being sacked and replaced.
"It's scary," says Stacy Martin, an Oklahoma Education Association spokeswoman. "We're going to be so ill equipped to meet those standards it's frightening. Among Oklahoma teachers, the Bush scheme is jokingly referred to as "No School Left Standing".
"Why are we cutting services?" Ms Kelly asked. "I don't understand. I know tax is an ugly word but you get what you pay for. I just think we have our priorities wrong."
© Guardian Newspapers Limited 2003
http://www.guardian.co.uk/ |
