September 2003

Views expressed are those of the authors, not necessarily of the AFSC.

Taxing Truth

David Bisson is a senior at the University of Massachusetts Amherst, where he majors in Economics. He interned this summer at United for a Fair Economy in Boston <www.faireconomy.com>

When he opened his mailbox in early August and found a child tax credit rebate check, Joshua Bellin was disgusted. He decided to sign an online petition that will soon be delivered to members of Congress and President Bush by United for a Fair Economy. In the area designated for comments, he wrote "$400 is not enough to buy my silence, and I hope the same is true for many taxpayers."

Lies © Ellen Shub

As Mr. Bellin's comment implies, the child tax credit checks received by millions of middle-income families amount to a relatively small sum--about 4 percent of the $330 billion ten-year cost of the May tax cut--designed to buy popular support for Bush's reelection and much larger tax breaks for the rich.

This particular deception is part of a more ambitious agenda: lurking behind the recent string of federal tax cuts are the blueprints for a conservative revolution. In a June editorial printed in the Washington Post, Grover Norquist, President of Americans for Tax Reform and the radical right's anti-tax ringleader, spelled out a five-step program to transform our current tax system into a single flat tax rate on wages. Unlike Steve Forbes and others who have attempted to push radical changes in the tax code in a single swoop, the contemporary conservative movement favors a more gradual assault. "The new Republican policy is an annual tax cut," proclaims Grover, and "each of the Bush tax cuts, past and proposed, moves us toward fundamental tax reform."

When they say "fundamental tax reform," the right is talking about dismantling the progressive tax system that has facilitated social progress in the US for the past 70 years. They are trying to smother the widely held belief that people should be taxed at different rates based on their ability to pay. And they are proposing a radical change in the tax system that would hurt most Americans by shifting the tax burden off capital and investments and onto the wages of low- and middle-income taxpayers. To market what should be a wildly unpopular agenda, the conservative movement has launched a war on truth.

For three years in a row, President Bush has exploited workers' insecurities in a stagnating economy to pass major tax breaks for his wealthy campaign donors under the guise of "economic stimulus." The recent 2003 tax cut provides a potent example: although it was sold as a "jobs and growth" package, the bill is a targeted giveaway to high-income earners and investors who are likely to save or invest their windfalls instead of spending them now in ways that would stimulate job creation and economic growth. The only thing Bush's tax cut is certain to stimulate is growth in economic inequality.

An honest look at the numbers reveals the tax cut's staggering inequities. Over the next 10 years, the bill will deliver the same amount, $90 billion, in total tax cuts to the top one-tenth of one percent of all US households--those with yearly incomes over $1 million--as it will to the bottom 88 percent.

The fight to repeal the federal estate tax epitomizes the conservative battle to dismantle progressive taxation through disinformation. Opponents of this tax on inherited wealth refuse to call it by its official name; they instead dub it the "death tax," implying that everyone who dies must pay, and intentionally fomenting fear and backlash among Americans who mistakenly believe that their modest savings will be seized by the government when they die. In reality, the estate tax is currently levied on less than 2 percent of estates--those larger than $1 million for individuals and $2 million for couples. It provides substantial revenues that allow the government to reinvest in the physical and social infrastructure that makes wealth creation possible. While a reasonable reform of the tax may be necessary to protect the very few small businesses and farms that end up paying it, permanent repeal is unnecessary and would cost the federal government $1 trillion over the next 20 years.

In August, the Kensington Welfare Rights Union led a Poor People's March for Economic Human Rights retracing the last weeks of Martin Luther King's life (as he began to build a multi-racial poor people's movement to abolish poverty). The march concluded with a rally and tent city in Washington DC. <www.kwru.org> © Hans Bennett

Recently, the radical-right tax crowd has enjoyed the help of an unlikely accomplice: the US Treasury. Most independent economists agree that ever since Bush's inauguration, Treasury analyses have been politicized to support the President's tax-cutting agenda. Traditionally, the Treasury produced reports showing the percentage increase or decrease in total federal taxes generated by new tax laws, but the Bush-era Treasury publishes percentage changes only in the federal income tax. The difference is significant because low- and middle-income households pay more in regressive payroll and other federal taxes than they do in income taxes, while the taxes paid by high-income households come primarily from the income tax. Therefore, analyses that isolate the income tax make it look like low- and middle-level earners have received larger percentage cuts in their taxes from the Bush tax cuts than high-income earners--exactly the opposite of reality. Martin Sullivan, an economic correspondent for the respected journal Tax Notes, has said that the Treasury's failure to acknowledge the difference between total taxes and income taxes "can only be characterized as an egregious use of misinformation." The good news is that honest tax analyses, similar to those done by the pre-Bush Treasury, are published by several non-partisan research groups, including the Center for Budget and Policy Priorities (www.cbpp.org), Citizens for Tax Justice (www.ctj.org), and OMB Watch (www.ombwatch.org).

The Republicans' annual tax cut strategy has already had dire consequences for America's fiscal health. In July, the Bush Administration announced an estimated $455 billion federal budget deficit for fiscal year 2003. A long-term analysis by the Center for Budget Priorities (CBPP) concludes that "under realistic projections, budget deficits will remain at or above $325 billion for each of the next ten years and total $4.1 trillion over that period." While the Bush administration and its supporters have been quick to blame the deficits on unanticipated spending demands, the CBPP report demonstrates that federal tax breaks enacted since 2001 will, over 2003 and 2004, cost nearly three times the combined costs of combat and occupation in Iraq and Afghanistan, reconstruction and relief after the September 11, 2001 attacks, increased expenditures on homeland security, and the cost of "fighting terrorism" worldwide.

America is at a crossroads of tax and budget policy. The choices made by citizens and legislators over the next few years will lead the nation down one of two diverging paths. Politicians and pundits on the right have issued assurances that the deficits are "manageable" while advocating ever more tax cuts aimed at the wealthy. Accepting this conservative revolution is likely to produce a fiscal train wreck in the foreseeable future that will be used to justify elimination or privatization of social programs that most Americans want and need--namely Social Security, Medicare, and Medicaid. The main beneficiaries of that train wreck would be large corporations that stand to profit from privatization of core government services, and wealthy individuals who do not depend on the current safety nets and would keep more of their incomes under a flat tax. The remaining majority would have less retirement, health, and job security. Most people would pay more total taxes for fewer services if the right eliminates progressive federal taxation and shifts responsibility for funding social programs to state and local governments whose tax systems disproportionately burden people with lower incomes. Or, we can struggle to create a nation based on principles of social and economic justice while investing in a future of shared opportunity and prosperity.

This is a time for great alarm and even greater action. The dangerous agenda of this administration and the lies that mask it must be exposed to as many people as possible. Op-eds and letters to mainstream papers, contact with legislators, and volunteer time and financial support for organizations working on tax fairness are all needed. The opposition is advancing, and only our resistance stands in its way.

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