Tax Cuts for All?

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Tax Cuts for All?
by James Hall, Senior Associate Editor

August 1, 2003

"Leaning Left"

James Hall This past month red-faced Republicans were caught by their own rhetoric. Demanding that America cut income taxes to help children, they were found out when it was revealed that the families of 12 million American children, including the families of over 1 million of our American servicemen and women, hadn't got a child tax break amounting to $400 per child. Meanwhile, thousands of wealthy Americans without any children will be pocketing tax breaks of over $100,000 apiece.

Why did this happen? Because the families with these children didn't make enough money---between $10,500 and $25,000-to pay federal income taxes. But these folks do pay taxes to the government, a lot of taxes in proportion to their incomes. They pay federal, state, and local taxes--sales taxes, gasoline taxes, property taxes, payroll taxes, hotel taxes, and more.

Republicans have made the tax cut argument all about income taxes, estate taxes, dividend taxes, and capital gains taxes-the taxes that the wealthy pay more of, not the taxes that most middle and lower class workers pay. If tax cuts are good for you and me, as Republicans keep telling us, then why should a tax cut be limited only to income and dividend taxes? Wouldn't it be just as good to cut gasoline taxes or social security payroll taxes or excise taxes on imported goods?

But that's not an argument that you'll ever hear Republicans make. Their advocacy group, the wealthy, doesn't benefit nearly as much from those kinds of tax cuts.

If we cut federal gasoline taxes instead of income taxes, a millionaire filling up his Cadillac Escalade or Mercedes would get a tax break, and so would a construction worker or insurance salesman filling his Ford Explorer. Gallon for gallon, they'd each get the same tax break. But that amounts to a much smaller break for the millionaire than he would get through a reduction in the income tax rate, or for a dividend or capital gains tax cut.

To see what Republicans have been up to, just look at the tax cuts they have championed. They eliminated the estate tax, a tax affecting only the top 1% of American taxpayers. They eliminated the top tax rates of the income tax. They cut capital gains taxes, which effect mostly the top 10% of wealthiest Americans with significant investments in the stock market (most middle class investors have limited investments in tax-free accounts). And they've cut the dividend tax on investments, which again benefits those with major investments in the stock market.

But Republicans are clever marketers: they claimed that the estate tax destroyed the "family farm" and the "small business," even with a $3 million exemption for the value of the estate. The few families that might have been forced to sell their farms could have easily been taken care of by a farm or business exemption to the tax. But in the Congress, Republicans blocked attempts to create these exemptions for farms and family businesses. Instead, they fought for, and got, a complete end to the estate tax, benefiting wealthy families who owned neither farms nor businesses.

The latest tax cuts will give a $200 tax cut to a middle class wage earner without children, a $100,000 tax cut to a wealthy family with or without kids, and allow Republicans to claim they're giving tax cuts to "everybody." And what about the poor working family that got no tax cuts? "They don't pay (income) taxes."

House Majority Leader Tom DeLay, who reluctantly gave into the push for a tax cut for poor children, says there's still over a trillion dollars in the US budget that remains be cut. But you can be sure of two things when the next Republican tax cut is proposed: 1) The wealthy will get the lion's share, both in percentage of cut and actual dollars; and 2) It will be pitched as a tax cut for everybody. But it won't be. ***

James Hall
Orlando, FL USA

Photo of the author courtesy of staff files