hearts and minds

August 6, 2006

Have We got a Tax Cut for You!!

Taxes are a compelling topic for most of us…First, who got the bright idea of cutting taxes, just when the budget is leaping deep into deficits, the economy is bouncing downhill, and hundreds of thousands of American troops are committed to worldwide preemptive war? Tax cuts during wartime? That’s a new one. This idea was obviously not concocted by a fiscal conservative, unless he wandered through the Looking Glass after winking and cooking the books at Enron or Harken.

One unmistakable link ties together the three major income tax cuts proposed and implemented since the turn of the 21st Century. Each has selectively and overwhelmingly enriched the extremely wealthy, has been zero help for the working and unemployed poor, and has left naught but crumbs under the table for the great majority of Americans in the squeezed middle. Meanwhile our national budget has dived from back-to-back surpluses to record deficits, while education and veteran’s benefits are being cut.

1) The estate tax phase-out and repeal will provide no benefits whatever to 98% of Americans. Guess which 98%. The greatest and unconscionable windfall will go to the richest one tenth of one percent, who, due to a loophole in the capital gains tax law, will be able to cash in on unlimited long term growth in wealth and assets that never gets taxed at all. Never! (See my analysis of “The Estate Tax Scam”, elsewhere.)

2) The income tax cuts already passed into law provide nothing for a minimum wage worker trying to support a family. They provide a paltry $300 tax cut for the first $26,000 of household taxable income earned. But a rich person will clear about $1200 for each $26,000 of taxable income over 288,350 dollars. Put that in your pipe and smoke it a while. Those with incomes over one million dollars annually can expect an income tax cut (not including the estate tax phase-out, and not including the proposed dividend tax elimination) averaging $130,000 per year. If the dividend tax is also eliminated, extremely wealthy individuals whose income is entirely derived from a stock portfolio will pay no taxes at all.

3) Everybody likes the idea of a tax cut. But what kind of a tax cut should it be? Should it be fair to working Americans? Of course. Should it give a quick boost to the economy without hobbling us to long term deficits? Definitely. But unfortunately those dim bulbs in charge came up with a very different idea. Now they want to eliminate taxes on stock dividends. Most Americans, of course, have never been able to enter anything other than zero on line 9 of Form 1040, and it’s not even on the EZ form, so eliminating taxes on stock dividends is of zero benefit to them. What does it mean to the more fortunate Americans who do have taxable dividends and who don’t skip line 9?

This stock dividend tax elimination is projected to total 364 billion dollars over ten years.

The wealthiest one percent own half of all taxable stocks & mutual funds that are owned by American households. The top one-fifth of one percent of tax filers will receive nearly 30% of this tax cut…226,000 people will split 100 billion dollars! That’s almost fifty thousand dollars per year per person, average. The other four-fifths of the wealthiest one percent will receive about 16% of the total tax cut. That’s about six or seven thousand a year, average. The top five percent (excluding the top one percent we just discussed) will receive another 24% of the tax cut. That comes to about two thousand dollars a year, average.

The other 95% of American taxpayers get to (unevenly) divvy up about the same total number of dollars that the richest 226,000 will pocket. Ninety-five percent of us will get zero, or maybe a sawbuck or a C-note, while the richest of the rich get fifty grand! from this latest proposal. Think about that. 43% of the dividend exemption that would benefit elders would go to the 2_ percent of elders with incomes over two hundred thousand dollars. Elders with incomes below 50 thousand dollars would together receive only four percent of the total dividend tax cut.

This scam to exempt dividends from income tax is being pushed with the slick talk that corporations have already been taxed, so taxing the individual on dividends is a double tax. Horse pucky. Money is taxed whenever it changes hands, unless lobbyists have gotten the President and Congress to slip in an exemption or loophole.

When I pay a mechanic, or the nurse who stanches my bleeding, or the farmer who grows my food, I’ve already paid taxes on that money, so why should they also pay taxes on it? Isn’t that double taxation? Hmm? All workers pay both payroll taxes and income taxes on the same wages. That’s real double taxation.

This three pronged tax program is nothing but deja-voodoo economics. It’s born-again trickle-down. It’s class warfare waged by the very rich to get all the dollars and trample the carcass of democracy.

How did your Congressman and Senators vote on these tax travesties that were pushed by the President? Be sure to return the favor.

If the object is to give a quick boost to a faltering economy, the best way is to give every man, woman and child an immediate one time $1000 food, clothing, housing, education and medical care voucher. If the object is to cut income taxes fairly, then simply double the deduction for dependent exemptions.

Exempt wages for work, not unearned income. Repeal tax cuts that are only for the rich.

(See: http://www.cbpp.org )

April, 2003

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