Archive for Saturday, February 10, 2001

The richest are winners in tax bill

February 10, 2001


Now that President George W. Bush's tax bill has been sent to Congress, at least two conclusions can be fairly drawn: 1) Bush is desperately seeking to close the widening and socially dangerous gap between the rich and the super-rich; 2) class warfare is now officially over the richest have won.

Don't take my word for it. Listen to Leon Panetta, the son of Italian immigrants who became a U.S. Army captain, a truly respected California congressman, director of the federal budget and White House chief of staff. For the 35 years I have known Leon Panetta, I have never heard anyone, even in the backbiting precincts of Washington politics, question the man's integrity, independence or courage.

Recalling President Reagan's 1981 tax cut and the uninterrupted federal budget deficits that followed it, and the countless budget summits, spending caps and freezes after that, Leon Panetta is blunt: "It took us 20 years to dig ourselves and our nation out of the hole we dug in 1981. ... The American people have a profound sense of fairness; the Bush tax cut constitutes a windfall for the best off. ... Fiscal responsibility will be a casualty. This thing (tax bill) is going to escalate with every interest making sure its own special tax break is included. They all know there is no way even if it doubles in size to $3 trillion that Bush will ever veto his signature tax bill."

Panetta is not an infallible prophet. But he was right in 1993 when he helped President Bill Clinton in an ultimately successful effort to stem the hemorrhage of budget red ink to raise income tax rates on the richest 1.2 percent of Americans. Wrong in 1993 - and now enthusiastically backing Bush's 2001 tax cut was the Wall Street Journal editorial page, which declared: "This administration gave up on deficit reduction even before it started. Its 'plan' consists almost entirely of tax hikes. It would certainly be an upset of historic proportions if higher taxes actually led to lower deficits" exactly what the Panetta-backed plan did lead to.

William F. Buckley's National Review waved the custom-made shirt of class warfare in 1993: "The income tax rate hike aimed at the nation's most productive citizens will damage investment, reduce national savings, slow business and job creation, and most importantly, fail to add a penny of revenue to the federal treasury." The Journal echoed this defense of the deserving rich: The Democratic plan was "designed to punish success" through "this witch's brew of taxes and mandates, (which is) poison for the economy."

Wrong. Wrong. Wrong. Federal income tax revenues accelerated up 40 percent in the first four years after 1993. But what about that over-taxed top 1 percent? According to an analysis of IRS data done by the respected Center on Budget and Policy Priorities, in 1992, "the average after-tax income of the 1 percent of tax filers with the highest income" was $398,000. By 1997 (the last year for which full data is available) and long after the punitive increased tax burdens had been placed on them, the top 1 percent of tax filers had an average after-tax income of $518,000. That amounts to an average income increase for the richest 1 percent of 30.1 percent.

In stark contrast, during that same period, the average after-tax income for the bottom 90 percent of tax filers rose a modest 3.6 percent. So to whose aid does the new Bush tax plan come? That "persecuted" 1 percent who would receive $39,000 each and approximately 40 percent of the overall tax cut. According to a U.S. Treasury Department study, the top 1 percent of the population under existing law pays 20 percent of all federal taxes. It doesn't take the master of a Palm Pilot to figure out the top 1 percent would be getting back, in the Bush cut, about twice the portion of the federal taxes they pay.

Panetta, who has been through the frenzied bidding war of a big tax cut before and who has nursed the fiscal wounds inflicted upon the nation, fears the fiscal discipline will be the very first casualty.

Just maybe Bush will find time to explain to that single mom of whom he speaks, the one with two children earning $22,000 a year, just why the United States government cannot assure that her kids will learn in a safe, clean and superior school or why their grandmother cannot get her prescription filled because we need the money to give a tax break to a billionaire.

Mark Shields is a columnist for Creators Syndicate.

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