The Big Payoff
April 15 is Tax Day. If your income was more than a million dollars last year, you might want to call it Pay Day. Thanks to President George W. Bush's tax cuts last summer, on average, each Texas multi-millionaire can expect a $94,000 tax break - more than what most Texans will earn this year - according to the Center on Budget and Policy Priorities, a non-partisan research and analysis group. But a majority of Texans will see their federal tax bill reduced by less than $100 per person this year.
Moreover, according to a 2002 study by Thomas Piketty and Emmanuel Saez for the National Bureau of Economic Research, the incomes for this top income group have grown by more than 500 percent from 1970 to 2000, from an average of $3.6 million to $24 million. In contrast, incomes for the bottom 90 percent have decreased by a measly one-tenth of 1 percent.
The 2001 recession, Bush's tax cuts, and an increase in military spending produced an unprecedented swing from a federal budget surplus of $236 billion in 2000 to a deficit of $455 billion in 2003. The deficits are expected to continue, adding more than $5 trillion to the federal debt over 10 years.
Yet critics see a more pernicious motive behind Bush's tax cuts. "The Administration's core policy objective in this area is to shield financial wealth from all taxation," James Galbraith, professor of government at the University of Texas at Austin, recently wrote in the Progressive magazine. "Quite soon, taxes will fall mainly on real estate, payrolls, and consumption. This is to say that taxes will be paid mostly by the middle class, by the working class, and by the poor."
Contrary to one Bush rationale, long-term tax cuts to the wealthy are an ineffective means to stimulate the economy. According to data from the Economic Policy Institute, three years after the recession began, the economy is still down by 2 million jobs.
Since 2001, $450 billion of the $2.6 trillion in Bush tax cuts have gone into effect. With this lost revenue, the Bush Administration could have hired not only the 2 million unemployed, but 2 million more people with annual salaries of $35,000 each.
Unbridled military spending - not counting expenditures for the combat operations in Iraq and Afghanistan - also contributes to the U.S. budget deficit. Chris Hellman is a military budget analyst and director of the Military Spending Project at the Center for Arms Control and Non-Proliferation. He said the Department of Defense plans to spend $500 billion annually on defense over the next five years - none of it associated with the war on terrorism or actual military operations.
"Regardless of how you feel about whether we should be shooting people in Iraq, the defense budget has nothing to do with that," Hellman said.
Tax cuts and excessive military spending have created a massive debt that the Bush administration will likely use to justify dismantling social programs and privatizing Social Security and Medicare.
"If you want to cut down government, or 'starve the beast' as they like to say, then you had better give up on the idea of doing it through government spending," explained Richard Du Boff, professor emeritus of economics at Bryn Mawr College. The only way to do it is to cut taxes, and cut, and cut, particularly for the rich. This will produce a very large deficit that will scare the living daylights out of people. So then you turn around and say now the only way to cut the deficit is to cut government off at the legs." •
By David Martin