May 27, 2003
The hungry get scraps; the gluttons get a feast.
That's the best description I can think of for George Bush's tax plan that Congress has agreed to.
In the next four years, the top 1 percent of Americans will get, on average, tax breaks worth $104,000, according to Citizens for Tax Justice.
The bottom 20 percent of Americans will get all of $45.
The next 20 percent of Americans will get a total of $299.
Those who make more than a million will get $93,500 this year alone, according to the Tax Policy Center.
You can't get much more unfair than that.
And despite what you may be reading in the media, this tax package will not help all Americans: 36 percent of U.S. households won't get any tax break whatsoever this year, and 53 percent of U.S. households will get less than $100, according to the Tax Policy Center.
"The final agreement is, in fact, tilted against lower income working families with children," says the Center on Budget and Policy Priorities. The bill "accelerates all of the child tax credit and marriage penalty relief provisions for the 2001 tax-cut legislation that benefit middle and upper income families, while failing to accelerate either for low and moderate-income working families."
Now I don't oppose tax cuts in principle, especially when, as now, the economy is soft and the risk of deflation is serious.
But the question is, how are you going to structure the tax cut, and what are the long-term consequences.
This tax cut is structured to favor the very rich: They are the ones who are going to benefit most from the reductions in dividend and capital gains taxes and from the flattening of the progressive income tax.
Yet they are the ones who need the tax breaks least.
And giving tax breaks to the rich is a very inefficient way to get the economy going. As Warren Buffett, the second richest man in America, said in The Washington Post, this tax package may give him a $310 million break, but the economy would be boosted much more if 310,000 families got $1,000 each.
The reason being, they would go out and spend that money on items they've been postponing purchasing: like dishwashers, washer-dryers, computers, fridges, TVs, and cars. If consumers increase their buying of these big-ticket items, the economy will take off. Warren Buffett probably already has all the TVs and dishwashers he needs; he's most likely to save his tax break, not spend it. And what the economy needs now is for consumers to spend.
Long term, while the pricetag of this tax package is marked as $320 billion, it is more than likely to cost $800 billion, since the bill was loaded with sunset clauses that Republicans are already vowing to repeal.
So if it's really going to cost $800 billion over ten years, that will increase the deficit dramatically and may ultimately force interest rates up, which will then strangle the economy.
But for Bush, that doesn't matter too much, since his reelection campaign will have long since been concluded.
Let someone else worry about it later.
That's the Bush motto.