Tuesday, May 16, 2006

The Folks Crying "Class Warfare!" Are Actually Waging One

A report by the Center for Budget and Policy Priorities, "Tax Reconciliation Agreement Distorted by Obsession with Capital Gains and Dividend Tax Cuts: Middle-Income Households to Receive Tax Cuts Averaging Only $20," was my primary source for this column. David Corn also used the CBPP numbers here. You can get some of the analysis on the difference between the top-line economic numbers and how the economy feels to most Americans from Ezra Klein here, but what you really want to read is the LA Times commentary from Jared Bernstein ("You Know How To Add, Don't You?").

Class Warfare Continues

East Valley Tribune, May 14, 2006

While you ponder last Thursday’s revelation of the Bush administration’s database containing the date, time, and phone number of every telephone call you’ve made since 2001 -- created without a warrant, legislative authorization, and without telling us -- you might not have noticed the latest piece of really, really bad GOP tax legislation.

You may have missed it because unless you’re in the top fifth of taxpayers, the tax cut won’t really benefit you -- because that’s what it was designed to do.


According to the Urban Institute-Brookings Institution Tax Policy Center, the effect of the latest $70 billion tax cut package is pretty striking. Using current data, taxpayers in the bottom 20 percent will get no tax relief at all, zero percent of the benefits. Taxpayers in the middle 60 percent -- the second, middle, and fourth quintiles -- share 6.3 percent of the benefits; the tax breaks range from $6 for taxpayers in the second 20 percent to $115 in the fourth 20 percent. The vast majority -- 93.7 percent of the total -- goes to taxpayers in the top 20 percent.

But even within top 20 percent of taxpayers, it’s still painfully true that the rich get richer. The top 1 percent of taxpayers get 30.9 percent of the benefits, and the top 0.1 percent get 18.4 percent of the swag.

In other words, taxpayer with incomes of $100,000 or less get 12.8 percent of the tax cuts, with 87.2 percent going taxpayers with incomes above $100,000. But it’s not enough to make $100,000, because even within that select group, 55.1 percent of the entire tax cut goes to taxpayers with incomes above $200,000. But even that pales next to the share going to taxpayers with incomes above $1 million; they get 22.1 percent of the tax cut, an average break of $41,977.

Oh, the usual argument is that people who pay more in taxes should get more of the tax cuts. Swallowing that argument requires that you pretend that people making $35,000 or $50,000 or even $75,000 don’t pay taxes. But they do: Social Security. Medicare. State and local sales, income, and property taxes. Gasoline taxes. They just don’t pay taxes on dividend and capital gains income because they don’t have any; even if they own those assets, they’re in tax-deferred pension plans. So a tax cut focused on income that overwhelmingly goes to the well-off asset-rich misses most Americans entirely, and winds up instead in the pockets of those already doing pretty well.

If you make less than $100,000 a year and think any of these tax cuts benefit you, you’re a chump. You’re being scammed by people whose sole mission is to help the comfortable and assist the better-off. That’s why they’re pretending that extending cuts to dividend and capital gains income taxes in 2008 and 2009 is a tax cut for you -- when, unless you’re in the top 1.0 or 0.1 percent, it isn’t.


You’re hearing loads about how the economy is doing well and how the voters haven’t given the Republicans credit. But that’s not how voters feel; the "wrong track" number in polls is amazing, even to skeptics like me. If you want to know why voters at large feel so poorly about the economy despite pretty good top-line numbers, you should examine this latest tax cut for enlightenment.

It’s not a lack of GOP communication skills; it’s that the overwhelming share of benefits of economic growth have skewed to those at the top. The economy may be growing, but real wages actually fell despite the recovery. Just like with this GOP legislation, in which for every dollar of tax cuts, 6 cents gets shared among 80 percent of Americans and 94 cents is reserved for the top 20 percent, with a third of their share set aside for the top 1 percent and over half of that reserved for the top 0.1 percent.

The GOP wants to stiff most of the people all of the time and still expects them to feel grateful. No amount of world-class spin can fix that.

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