It looks like Dionne was right when he predicted in the Washington Post last month that conservatives would soon be assailing the “non-taxpaying class.”
I heard on NPR this morning that the Bush tax policy wonks are gearing up to try to convince the populace that the lower and middle classes should shoulder a larger share of the personal income tax burden.
(There’s a tax rant coming on. Proceed at your own risk.)
I’m sorry, what “declining burden”? The lowest tax rate hasn’t been higher than the current rate of 15% since the mid-60’s.
And while a person making $11,000 a year ends up paying much less in tax than that same person would have paid in 1970, that’s because $11,000 is not worth anything close to what it was worth in the 70’s.
The tax code presumes that some people have so little income that they need every penny to get by (thus the tax brackets, standard deduction and various credits). And that premise is correct. Take a look at a recent U.S. Census report, based on 2001 data, showing that poverty among low-income households is on the rise.
Of course these taxpayers aren’t constituents that the administration cares about.
But Bush is taking his case beyond low-income taxpayers and into the middle class, arguing, Weisman says, “that people who earn between $50 [thousand] and $75,000 a year should be paying a third more taxes.”
Here’s my take: with tax revenues in a freefall and the deficit growing by leaps and bounds, another set of tax cuts designed for the wealthy and for corporations would be devastating to the U.S. economy. And, to its credit, the administration evidently is coming to terms with the fact that the reduced revenues resulting from its tax cuts will need to be recouped somehow.
But forget about reinstituting the estate tax, or putting off that capital gains tax cut!
Despite the fact that unemployment is rising astronomically, and the number of homeless is growing by the day, Bush and his cronies believe the answer is for those in the low and middle tax brackets–who are already suffering from lost jobs and rising prescription drug costs and rising housing costs and drastic reductions in their 401k plans–to buck up and pay more.
As I said before, the assertion that lower and middle-income taxpayers are paying taxes at a lower rate than they traditionally have, is completely false.
What’s more, the argument that wealthy Americans are shouldering more of the personal income tax burden than they traditionally have is equally specious.
When the personal income tax was originally enacted, more than 90% percent of the population was exempt from filing. Only the wealthiest 10% paid taxes, at rates between 1% and 7%.
Ultimately, the demand for revenue grew and the rates were increased across the board. But from the start of World War II until the Reagan cuts in the 80’s, the upper personal income tax tier was never less than 70%, and was at times above 90%.
Reagan reduced the top bracket to 50%, and then to 28% by the late 80’s.
Bush Senior raised them a bit, to 31%, but the economy was in shambles by the time Clinton took office. (Roberts Branden points out that the “debt was increasing by $350 billion per year with the budget [Bush Senior] left to Clinton.”)
Clinton increased the top rate to 39.6% (effective in 1994), and within a few years the economy was again on the upswing. (Branden notes that, in the past, “the rich paid far more taxes than they did under the 39.6% rate that Clinton pushed through Congress. Additionally, Clinton’s announced plan was to eliminate the deficit within 12 years. He did it in seven.”)
The 2001 tax cut reduced the top marginal rate from 39.6% to 35%, although the reduction will be phased in gradually from 2001 to 2006.
Bottom line: the Bush administration has already had its way with the tax code once, last year, and it’s evident that the Reaganesque trickle-down strategies aren’t working.
There’s a saying in the tax planning world: pigs get fat; hogs get slaughtered. In translation, this means that a good-faith interpretation of the tax laws, even if it benefits you, is unlikely to get you in trouble. An aggressive and disingenuous interpretation, on the other hand, will get you busted and shamed.
I’m hoping that these same principles apply to tax policymaking. Last year Bush and friends got some pork for themselves and their corporate interests, but they’re overreaching now. They’re pushing into real people’s pockets.
And I hope their efforts land them on the sidewalk in 2004.