Tax Cuts

By The Daily Brew

 

“Bush wants us to believe that everyone is going to benefit from

his tax cut.  But this is simply not true.  Because of the Earned

Income Tax Credit, our $22,000 waitress isn't paying any income

taxes at all.  But that doesn't mean she doesn't pay taxes;

as explained above, she pays full freight on the social security

and Medicare.  So while Bush is planning on cutting Cheney's

taxes by hundreds of thousands of dollars, he isn't going to

lighten her tax load one bit.”

 

Tax Cuts

February 6, 2001

 

Having appeased the theocrats who make up the foot soldiers of the Republican Party, Bush has now set out to appease the generals in his hundred million dollar presidential campaign:  The Rich.

 

To make the millionaires happy, Bush is pushing hard for his massive federal tax cut.  You know, the one that is going to put a few hundred dollars in the pockets of taxpayers in the middle class, and a few hundred thousand dollars in the pockets of the top earners, which includes every single talking head on television.

 

Bush argues that since the rich pay the majority of federal taxes, it is only proper that they get the lion's share of tax relief.

 

Lets be honest for a second.

 

The Federal Government collects taxes from four primary sources.

 

The income tax, the social security tax, the Medicaid tax and the inheritance tax.

 

Income taxes and inheritance taxes are progressive.  That means as your income or your inheritance climbs, so do your tax rates.  This is rooted in the fundamental principle that more taxes should be paid by those who can most easily afford it, and by those who have benefited the most from the economy.  For example, the inheritance tax doesn't even apply to estates under $675,000 for a single person, and $1,350,000 for a married couple. Basically, unless you are a millionaire, your estate is never going to be charged an inheritance tax at all.

 

The Medicare tax, on the other hand, is nominally a flat tax.  No matter how much you earn, you pay the same rate, 1.45% of your wages.  Of course, the Medicare tax is not applied to any earnings you might have had from stocks or bonds, so if you include those sources of income, the Medicare tax is actually regressive, meaning the poor pay more as a percentage of income.

 

The social security tax is also regressive, even if you ignore the fact that like the Medicare tax, income from stocks and bonds is exempt.  The way the social security tax is set up, the highest wage earners pay less as a percentage of income that do the poor, even ignoring the income they might have from stocks and bonds.

 

For anyone making under $76,200, the social security tax is 12.4%.  Above $76,200 you stop paying social security tax altogether.  So, for example, if Dick Cheney makes $15 Million working at Halliburton, he pays $9,450 in social security taxes, or about  six one hundredths of one percent of his income.  That's right; 0.063%.  In contrast, a twenty two year old single mom making $22,000 a year as a waitress pays the full 12.4%, or about 200 times the rate for Cheney.

 

So what does all this have to do with tax cuts?

 

Well, Bush, quite naturally, is proposing that we fiddle with the progressive taxes, and leave the regressive taxes alone.  Bush wants to reduce rates across the board on the income tax, eliminate the inheritance tax altogether, and leave social security and Medicare taxes alone.

 

Bush wants us to believe that everyone is going to benefit from his tax cut.  But this is simply not true.  Because of the Earned Income Tax Credit, our $22,000 waitress isn't paying any income taxes at all.  But that doesn't mean she doesn't pay taxes; as explained above, she pays full freight on the social security and Medicare.  So while Bush is planning on cutting Cheney's taxes by hundreds of thousands of dollars, he isn't going to lighten her tax load one bit.

 

You might argue that social security and Medicare are "off budget" and shouldn't be included in this calculation.  That is certainly the argument Bush and his staff are making.  But it isn't really true.

 

First, Bush's economic adviser Larry Lindsey says that since social security is eventually paid back out to the taxpayer, it "wouldn't be fair" if they weren't contributing their full share.  Of course, this ignores the fact that many people pay into social security for years never see a dime of their money because they die before the retirement age.  This is particularly true for poor people, who work the difficult, dangerous and low paying jobs for which Bush provides no tax relief.  In fact, the average life expectancy of a black male in America with no college education is below the retirement age for social security.  That's right.  Black men in America who don't go to college on average will never collect any social security.   

 

The second reason that Bush's argument is a bunch of hooey is because there really is no such thing as a "surplus."

 

The only reason we have anything that even looks like a surplus is because we are raiding the funds paid into social security to pay for general obligations of the government.  So social security isn't really "off budget."  The poor folks who are paying the regressive social security tax are actually subsidizing the federal budget.  Al Gore promised to end this by putting those funds in a "lock box."  Saturday Night Live promptly mocked him for it, likely costing him the Presidency.  Thanks a bunch, NBC.

 

There are moments when I have been extraordinarily proud to be an American.  I beamed when we were the first to put a man on the moon.  I was screaming USA! when a bunch of working class kids beat the Russians in hockey in the 1980 Olympics.  I was ecstatic when the 24th Marine Expeditionary Unit plucked Air Force pilot Captain Scott O'Grady off a Bosnian mountainside after his F-16 went down behind enemy lines.

 

The Democrats in Congress have a chance to make me feel that way again. All they have to do is defeat Bush's tax plan.

 

© 2001 The Daily Brew

 

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