Sunday, August 24, 2003

Gilligan's Island Economics

This week's East Valley Tribune column didn't get the best headline, but read through to the punch line instead. I think I've found a way to describe Bush's tax policy--it's Gilligan's Island economics, designed by people who watched the show as kids and identified with the Millionaire.

I first recalled the character's name as "J. Thurston Howell III," but according to the Internet Movie Database, it's Thurston Howell III, played by Jim ("Mr. Magoo") Backus. No first initial. I must have been thinking of J. Fife Symington III.

East Valley Tribune, Aug. 24, 2003

The latest example of President Bush’s disregard for Americans making less than $350,000 annually is the incredibly obscure Windfall Elimination Provision and the Government Pension Offset, which afflicts former public servants who change careers. People who worked in the U.S. Army, or as teachers in a state (like Texas) with a separate retirement system, who then retire and start a second career, find that Social Security doesn’t work for them like it does for everybody else.

Current law treats anyone vested in a separate public pension system as getting a “windfall.” Their Social Security benefits -- both the employee’s and any spousal benefits -- get reduced by two-thirds of the employee’s other retirement benefits.

The WEP/GPO only affects workers who participated in public pension systems separate from Social Security. But many teachers, Air Force, and Postal Service retirees work second careers, pay the same Social Security taxes, but then don’t get the same benefits as a co-worker with the same tenure and salary. Two-thirds of their earned Social Security benefits essentially get taxed away because these employees -- and only these retired public employees -- earned a second pension.

There are wrinkles in the WEP/GPO; the tax gets reduced after working more than 20 years in the Social Security system, and eliminated entirely after 30 years. But police officers or military personnel retiring from duty and starting second careers may not want to work another 30 years -- and may have counted on Social Security so they don’t have to.

Like the Alternative Minimum Tax, the WEP/GPO originally was intended to affect only highly-compensated individuals. But while it may have made sense decades ago to treat public pensions differently than private ones, inflation has swept middle-class families into both the AMT and the WEP/GPO. Everyone in Washington knows that we need to reform the AMT, and it makes no sense to tax teachers’ and firefighters’ pensions punitively, either. But unfortunately, the Bush administration believes people making $350,000 annually need our help more.

The administration’s unwillingness to fix the AMT and WEP/GPO problems highlights some of Bush’s lies about his tax policies. When Bush remembers to insert the qualifier, he claims he’s cutting taxes for everyone who pays income taxes. But even that’s a lie; about 10 percent of people paying income tax will get nothing.

But frequently Bush and other GOP partisans claim their tax cuts benefit everyone who pays taxes -- without the “income” qualifier. To make that claim, they must pretend that Social Security taxes aren’t taxes, but rather just pension payments, all of which taxpayers get back eventually. (This trick requires them to forget years of their rhetoric about Social Security privatization, but forgetting what you said last year is apparently a right-wing specialty.)

But the WEP/GPO problem shows that’s a lie, too. These public-system retirees working a second career don’t get back their Social Security payments. They just pay the taxes.

How hard is it to understand that Social Security taxes are taxes? They’re regressive, affect everyone, and haven’t and won’t be cut. Instead, Bush has cut taxes on dividends, the estate tax, and income taxes at the top brackets, all to benefit people making more than $350,000 a year -- and at the expense of middle-class AMT payers and retired teachers and military personnel facing the WEP/GPO.

I finally understand the Bush mind-set. He’s watched too many reruns of Gilligan’s Island. (Everybody sing: “A four year cruise.”) Bush wants to stiff Gilligan, the Skipper, the Professor, and Mary Ann, all so he can give massive tax breaks to millionaire Thurston Howell III.

It’s a Yale thing; you wouldn’t understand.

No comments: