Columns » Ernest Dumas

Bush the genius


Here's an intriguing question. Did George W. Bush blunder into his wonderful strategy of exploiting American workers' angst over their taxes to gain ever greater tax cuts for the rich and friendly corporations or is there a cruel but methodical genius at work? Bush and genius are a hard nexus to make in a single sentence, but Karl Rove may be the explanation. We have former Treasury Secretary Paul O'Neill's revealing account of a White House meeting in 2002 when the idea of a second round of tax cuts for the wealthy came up. Bush asked if they had not already done enough for the rich and big business in the 2001 tax cuts. Rove explained to him that it was the principle of the thing, so he said OK. This week, Bush was meeting with a group of corporate executives and one carefully chosen worker at a Florida plant to tout the benefits of his three rounds of tax cuts, which he said were finally getting the economy rolling. He is demanding that Congress make the 2001 tax cuts permanent. "Mr. President, we have to keep this tax cut," said the chairman of a metals company. If the solitary worker in the skit, who is presumed to be mad about his taxes, had anything to say it wasn't reported although his presence conveyed the central message of the photo-op. Hold that little tableau -- Bush, the CEOs and the lonely worker - in your mind. In 1979, the year before Ronald Reagan was elected president, the median salary of CEOs in the United States was roughly 40 times the median income of workers. Now the executive's income is about 500 times that of the employee's and the differential is growing rapidly. A radically different tax policy doesn't account for all of the widening disparity but it's a giant factor. For three-quarters of a century, the premise of U. S. tax philosophy was to nourish a strong middle class by taxing vast incomes and hereditary wealth. The Bush and dominant Republican philosophy is to exactly reverse it. While taxes on vast inheritances are vanishing altogether and those on investor and corporate income are shrinking, the worker's burden is rising. State and local governments everywhere, Arkansas notably among them, are raising consumer taxes, partly because federal action has slashed state and local revenues as well as federal receipts and left traditional services like education, health and social services underfunded. The combined federal, state and local tax bite for workers has risen to historically high levels, while taxes on corporations and the wealthiest 5 percent of Americans have fallen to their lowest effective rates since World War II. The average employee who has to work harder to maintain her living standard while aggregate taxes take a bigger chunk of the family income may be forgiven if she finds appealing Bush's talk of making tax cuts permanent and lowering taxes still more. The Bush tax cuts that affect the working family are next to invisible but there is always hope. Let's go back to the question of whether Bush stumbled onto this grand political recipe. A good clue is that he first tried it as governor of Texas but it was too cruel even for the Texas legislature. Gov. Bush proposed a "tax reform" program that called for eliminating the Texas corporate franchise tax, sharply reducing property taxes and replacing all of the lost revenues with higher sales taxes, something akin to the European value-added tax. Texas doesn't levy a corporate income tax but a franchise tax based on a company's worth and federally reported income raises more than $2 billion a year (compared with a mere $8 million in Arkansas). Repealing the franchise tax would have left corporations virtually tax-free in Texas except for ad valorem and some sales taxes. About 70 percent of Gov. Bush's property tax cut would have gone to business instead of homeowners. It would have been a monumental shift of tax burdens from corporations and the wealthy to the middle class. Bush said it would create a more business-friendly climate in Texas and create jobs. The legislature couldn't stomach it. The Texas program formed the template for Bush's federal tax strategy except for one thing. In the Washington version, none of the revenue loss is offset by other taxes. Federal tax receipts shrank for three years in a row, the first time that has happened in 80 years. A $200 billion surplus in Bill Clinton's last year has turned into a deficit approaching $550 billion -- $700 billion if you discount the raid on Social Security reserves. Now Social Security is imperiled, health insurance for workers is disappearing, government health benefits shrink, jobs rush overseas and public education suffers. But everyone who gets Bush's multimillion-dollar tax rebates can now much better afford the private facsimile of all these services. Is it not a genius the mind that can imagine and then deliver such a scenario?

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