April 11, 2006
Before Congress left on its Easter recess, members failed to make the Bush tax cuts permanent. That's good news.
The administration's tax agenda would reduce revenues by $1.9 trillion over 10 years and would worsen the deficit by at least $2.7 trillion.
The rationale behind wanton tax cutting is to "starve the beast" of so-called big government. But the effect of these cuts is to fatten the wealthiest.
In early April, The New York Times analyzed Internal Revenue Service data that showed that the wealthy gained disproportionately from President Bush's previous tax cuts. Taxpayers with incomes greater than $10 million reduced their investment tax bill by an average of half a million dollars in 2003. They ended up paying about the same percentage of income taxes as those who made $200,000 to $500,000.
Middle-income taxpayers also have investment earnings like stocks, bonds and mutual funds. But those with incomes of $50,000 saved a whopping $10 on their investment income.
Meanwhile the poor, who are simply struggling to make ends meet, don't benefit from cuts in taxes on investment income because they don't have investment income. Yet they are starved by the impact of tax cuts, which drain money from the budget. Republican lawmakers then use the budget shortfall to justify cuts in spending programs that often aid the poor.
The 2007 budget that Congress will consider when it comes back from recess not only contains Bush's tax cut proposals, but also Bush's proposals to slash some of the few programs that benefit poor taxpayers -- such as the Earned Income Tax Credit and the Child Tax Credit.
The White House has proposed changes in eligibility guidelines for the Earned Income Tax Credit and the Child Tax Credit, reducing a benefit for the working poor at the same time that benefits are being preserved, or expanded, for the wealthy.
Sadly, to accommodate tax cuts, Congress has proposed other budget-cutting measures that hit those who are at the bottom hardest -- such as new fees on Medicaid recipients, cuts in the number of people who can receive food stamps, cuts in spending on higher education and cuts in federal child support enforcement.
While recent economic reports boast of a "robust" and "resilient" economy with lower unemployment rates and solid economic growth, millions of Americans have not experienced this resilience. That's partly because they have not benefited, as the wealthy have, from the Bush tax cuts.
Instead, in the name of cost containment, they've lost medical benefits and access to food stamps. And now they pay more for things like education. The president likes to describe his economic plan as developing an "ownership society."
But his tax policies have fed the rich at the expense of the poor.
Julianne Malveaux is a Washington, D.C.-based economist, is author of several books, including "Wall Street, Mean Street and the Side Street: A Mad Economist Takes a Stroll" (Independent Publishers Group, 1999). She can be reached at pmproj@progressive.org.