Tuesday May 27, 2003 at 10:27 PM
It's More Than a Tax Cut
Appearing in Politics & The Economy
In what is sure to be yet another large gathering of white male Republicans at the White House, President George W. Bush is set to sign the new tax bill into law tomorrow. While most of the media and public have debated the need, amount, and beneficiaries of the tax cut, only a select few have noted the meaning and philosophical underpinnings of the third largest tax cut in our history. (For those of you keeping score, George W. is also responsible for the second largest while credit for the coveted first place goes to the dearly beloved Mr. Reagan, patron saint of budget deficits and voodoo economics.)
Once again, the White House has deftly maneuvered the public debate of this issue, successfully obscuring the real purpose, goal and ultimate effect of this tax cut. While the Republicans gather at the alter of economic stimulus, there is little reason to believe these cuts will have the desired effect. Not that they necessarily care. No, the real purpose of these cuts is the systematic strangling of the federal government so that it is incapable of funding a whole host of current programs and obligations. The Republicans know that the political costs of an open debate on the merits and worth of various social programs would be enormous so instead, they limit government revenue ultimately forcing the reduction or elimination of such programs by pointing to a spiraling national debt and falling tax revenues. The issues associated with environmental management and corporate regulations bring similar risks but again, by gutting the budgets of the agencies responsible for investigating and enforcing such regulations, they avoid the political costs of an open policy debate.
You don’t have to read too far between the lines to realize that what is happening here is a fundamental restructuring of the federal government so that it is incapable of providing for the middle and lower classes or effectively policing itself against the abuse of industry. As devastating, it will exacerbate the already alarming divide between the rich and poor which today leaves us a divided nation of haves and have-nots. We are the richest nation on Earth, if not the richest nation in history and yet we have a health care system that fails over 20 million of our citizens, an education system that is partially funded by state-sponsored gambling, over 1.35 million of our children living on the street, one out of every 147 residents housed in prisons, a minimum wage so low that working full-time still lands you below the poverty line, and the largest, most destructive military ever assembled.
Somebody, somewhere please explain to me how this $350 billion tax cut has anything to do with improving the lives or welfare of the citizenry of this country.
Comments
Bob, this is Erik McD. What I really really want to know is
why social security is a such a massive proportion of
the national budget, much more than national defense
even, but yet the state does jack all for the poor and
other needy segments of society. Taxes in the US are really
high compared to in Japan -- nearly double, if you
can believe that -- and the difference is not just national
defense. Though in many ways the social net in Japan is much
more grass roots than in the US (your kids take care of you
when you get old, companies until recently offered you a job
for life, etc.), you can actually count on a retirement pension
from the government that can sustain life. My impression
is that this not at all the case in the US.
Of course I am horrified by the prospect of even further
reductions in the little care the needy are currently getting.
I'm just wondering why the budget allocated to the needy,
at least under the category of "social security",
is so large in relation to its (pathetic) effectiveness.
Love
Erik
Posted by: Erik McDermott on Tue May 27, 03
I can't say that I know much about the problems with Social Security or why it's in trouble, or why it's such a significant part of the national budget. I can say however, that it is one of the most distorting factors in the reporting of government spending, tax revenues, and deficits. Not only do different reports use different projections of Social Security but they also tend to include or exclude its effect to bolster a particularly rosy projection or apocalyptic vision.
One interesting aspect of the system is that it's a regressive tax. In other words, the more the make, the less you pay as a percentage of your income. For example, if you earn $100K per year, 7.5% of the first $65K of income. That comes to $4,875 or 4.9% of your income. By contrast, if you earn $35K per year, the national average for a family of four, you pay $2,625 or 7.5% of your income. Because of the $65K cap the difference is of course exagaretted as your income grows so that someone earning $250K only pays 2.0% and someone earning $1M only pays 0.49% of their income. The tax rate and cap change every year but the examples are, as they say, "close enough for government work."
You should also note that capital gains, dividends, inheritance taxes, and many other forms of income are all excluded from Social Security taxes. This means that the truly rich -- those that can live entirely off their investments and similar forms of income -- do not have to pay into the Social Security system at all.
The idea of a graduated tax system is that the wealthy pay a larger percentage of their income to the government in order to smooth out the wrinkles of inequality. For a variety of reasons I don't quite understand, that philosophy does not apply to the Social Security system.
Posted by: Bob Baxley on Tue May 27, 03
Just to give a bit of credit to what got me thinking about this subject. The June 2003 edition of Harper's magazine contains an essay by Thomas Frank entitled, "Get Rich or Get Out." The third paragraph of that essay includes the following:
"The 2004 budget is toxic. It is an epic of distortion and evasion and contradiction and misleading rhetorical ploys. The object of this malodorous epic is to outline the Bush Administration's plan for plunging the nation from surplus to deficit and to cast the blame for the ensuing disaster on the very people -- the retired, the sick, the poor -- who will feel the brunt of its effects."
And a few pages later:
"One of the reasons the Bush people love tax cuts is that tax cuts defund governments -- but gradually and indirectly, allowing plenty of time for blame evasion. Although it may not look like much now, this tax cut is a time bomb planted in the heart of activist government: as it grows, the whopping giveaway to the rich will compel massive cuts in government spending somewhere down the road."
There are some other great articles later in the issue as well.
Posted by: Bob Baxley on Tue May 27, 03