Nix the Tax Cut

P resident Bush’s proposal of a huge tax cut for the wealthy, at a time when the economy is in a deep hole, is too fantastic to believe. Coming on the heels of President Bush’s $1.35 trillion tax cut two years ago, which bestowed 40 percent of the tax breaks on the wealthy, additional tax cuts will only increase the gap between the rich and the poor.

Under Bush’s new tax cut plan, 58 percent of the benefit goes to those making over $100,000 a year; 35 percent goes to those making over $200,000. The jackals argue that a cut is only “fair” and that “double taxation” of dividends is unjust. True, the rich pay more taxes, but why is this unjust?

In 1998, the top 1 percent paid 35 percent of federal taxes, while the bottom 40 percent paid 1 percent. Some argue there is no way a tax reduction won’t benefit the rich because they pay the biggest percentage of taxes. But that’s not the whole story.

While the taxes paid by the richest 1 percent increased by 48 percent from 1979 to 1997, their income increased a whopping 157 percent. CEO pay increased from 96 times the average workers pay in 1990 to 458 times in 2000. Meanwhile, the assets of households earning less than $25,000 actually dropped between 1995 and 1998. On the basis of fairness, the rich should be paying three times more taxes than they do now.

Republicans push the idea that everyone should pay the same taxes no matter how much they benefit from the system. Under this policy, George Bush Sr. increased the number of people living in poverty by 6.5 million and George W. Bush increased those living in poverty by 1.3 million during his first year in office. At the same time, the wealth of the top 1 percent of U.S. households grew to equal the wealth of the bottom 95 percent. From 1997 to 2000, the wealth of the Forbes 400 grew at a rate of 6,602 times the daily minimum wage. At the same time, Republicans vehemently opposed increasing the minimum wage and Clinton curtailed welfare assistance.

Republicans have steadily eroded progressive taxes. Over the past 20 years, the tax burden on the wealthy fell and will decrease even further with Bush’s tax cuts. The inheritance tax was repealed for the top 2 percent of taxpayers. The wealthiest can now pass along their estates without paying any taxes, leading to the creation of rich dynasties—something Americans have assiduously avoided.

To justify the current tax cut, the jackals argue that half of all households will benefit because they own stocks. The president cites an average $1,000 benefit. If one person has $1 million and the other zero, the average is $500, 000, a meaningless average. The arguments about average tax cuts don’t mention that 64 percent of the benefits go to the top 5 percent of taxpayers.

The jackals claim the wealthy will invest in new plants and equipment to stimulate the economy. But the problem with the economy is overcapacity—manufacturers are using less than three-quarters of their current capacity. Why would the wealthy invest in new plants and equipment?

A tax cut will do little except give the wealthy more money to spend and leave us with the biggest deficit in history. Rather than cutting more taxes, previous tax cuts should be rolled back. We need to increase the minimum wage, invest in community projects, rebuild badly deteriorated schools, establish universal healthcare, create national broadband access, untangle the transportation mess, and invest in countless other projects akin to the public benefits that followed WW II. Such moves will begin to close the gap between the rich and the poor in this country.

Don Monkerud is an Aptos, California-based columnist and author .