On May 23 Congress passed a $320 billion tax cut. Or was it $350 billion? Or $550 billion? But what ever its size, one thing is certain: it was another bonanza for the richest of the rich – and will cost a great deal more than any of the numbers being kicked around.
One other number is worth noting: Vice President Dick Cheney had to break two tie votes in order to get the measure through the Senate when three Republicans (McCain of Arizona, Chafee of Rhode Island and Snow of Maine) and two Democrats (Miller of Georgia and Nelson of Nebraska) jumped their parties’ ships.
We all know the old saw about how figures don’t lie, but liars figure. When it comes to this year’s tax cuts, there are certain irrefutable facts that no one challenges. According to a computer analysis by the Institute on Taxation and Economic Policy:
• Almost two-thirds of the cuts go to the best-off 10 percent of all taxpayers and well over half goes to the top five percent.
• In contrast, the bottom 60 percent of taxpayers will get only a little more than 8 percent of the cuts, averaging less than $100 a year over the next four years.
• On the other hand, the average tax reduction for the richest one percent over the next four years will total more than $107,000, some 38 percent of the total tax cuts. Starting in 2006,when only the reduction in taxes on capital gains and dividends would be in effect, the best off one percent will get more than half of the tax bill’s ongoing benefits.
• Reductions in the top four tax rates that were enacted in 2001 will become effective in 2003, rather than by 2006.
An analysis by the Urban Institute-Brookings Institution Tax Policy Center shows that 50 million U.S. households will receive no tax cut whatsoever in 2003 and 74 million households will receive a $100 or less. According to the center, married filers with two children and incomes between $10,500 and $21,325 will receive no tax cut. The analysis says the average 2003 tax cut for households in the middle of the income spectrum will be $217.
These statistics do not explain how some say it’s a $320 billion program while others say the cost in lost revenue is much higher. But there is an explanation: The official accounting of the tax bill shoehorns seven of the eight cuts in the bill – an increase in the child tax credit, tax breaks for married couples, etc. – into a two-year period, and adds those numbers. And eureka! a tax cut costing $320 billion.
It’s called “sun setting.” The tax cuts are designed to expire after 2004 and revert to their previous level. All except one, that is: Cuts in taxes on dividends and capital gains don’t expire until 2008. After all, the 2004 elections might change things.
But no one expects Congress to allow the cuts to expire. Rather, as House Speaker Dennis Hastert (R-Ill.) said the day before the tax bill passed, “The $350 [billion] number takes us through the next two years, basically. But also it could end up being a trillion-dollar bill, because this stuff is extendable.”
The Center on Budget Policy and Priorities says if the bill’s provisions are extended for 10 years, the cost through 2013 will be as much as $1.06 trillion.
George W. Bush paraded the tax bill as an engine of growth, saying it would create an additional million jobs by the end of next year. However, that was contradicted by a recent survey by Deloitte & Touche, a Wall Street accounting firm. The survey found few business executives who thought cuts in the tax on stock dividends would help either their business or the economy.
Even the most optimistic forecasts say Bush’s plan will increase growth by, at best, only a one-half-of-a-percent in a situation where growth is stagnating in the less-than-two-percent range. Most observers say the economy must grow at more than 4 percent annually if the 13 million unemployed and underemployed workers are to find jobs.
The New York Times said the 2003 tax bill is “a tax cut without end.” While that may or may not be true, one thing is true: We do not have endless time to build the movement to defeat George W. in 2004.
The author can be reached at fgab708@aol.com
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