Columns » Ernest Dumas

More help for millionaires


Tax day came and went last week without many of the usual alarums about the tremendous tax burdens of Americans because the contortions that it takes to make that case have become too ridiculous. For everyone but the Bush administration, that is. The president made tax-week appearances across the country both boasting of the wonderful effects of his three tax cuts in three years and the drastic need for even more tax cuts. He carefully doesn't tell who stands to get his new tax cuts or even who principally benefited from the first three rounds, but everyone gets the impression that the beneficiaries are mainly working stiffs. Repetition of that line for three years seems to work, too. An African-American candidate for the state Senate at Little Rock, a Republican, touted the transforming help the Bush tax cuts have been to blacks the other day. It is a rare black family in Arkansas that has a significantly lower overall tax burden and a higher living standard today than four years ago. President Bush's Treasury Department, out of concern that Sen. John Kerry might wise up and try to make the injustices of the Bush tax cuts a central issue in the presidential campaign, put out a report at the first of the month saying - now, this is no joke - that the Bush tax changes had piled the federal tax burden onto the backs of the rich. If Kerry got the truth out to every single taxpayer Bush wouldn't carry a state. But Kerry has to soft-pedal the issue because his own record isn't perfect and many in his party - Arkansas's Sen. Blanche Lincoln, up for re-election, for example - voted defensively for just about every tax benefit for the rich and corporations, fearful that they'd be labeled a tax and spender. One thing everyone can agree on. The tax burden of Americans, as a percentage of the U. S. economy, has been declining pretty steadily for a long time. That is true if you combine all federal, state and local taxes and compute them as a share of gross domestic product. It is the lowest since 1968. Federal income taxes alone add up to the lowest percentage of the economy since the beginning of World War II. But there are two caveats to that heartwarming news. First, the federal income tax cuts the past three years, rather than stimulating the economy as some previous tax cuts did, have plunged the government from a massive budget surplus to gargantuan deficits, now in the neighborhood of $700 billion a year discounting Social Security trust fund surpluses. They haven't spurred the economy and down the road they will mean huge interest payments on the debt, slower economic growth and the inability of government to address national crises from security to the retirement of baby boomers. Second is the issue that John Kerry should be hammering every day. All that tax relief has done very little for most Americans but drastically raised the after-tax income of rich Americans and sharply lowered their share of financing the public needs of America in relation to the share of people who are less well off. Thanks to a few respected research groups, the Institute on Taxation and Economic Policy, the Center on Budget and Policy Priorities and the joint Tax Policy Center of the Brookings Institution and the Urban Institute, we have an antidote to the skewed analysis by the Bush administration of what it has wrought. While it is true that the richest 1 percent of Americans pay 33 percent of federal income taxes, about the only real progressive tax in America, their share of all federal taxes combined with state and local taxes is about 22 percent in 2004, which is less than 2 percent above their share of the cumulative before-tax incomes of Americans. And that figure is coming down. What the Bush people don't say is that the benefits for the middle class from the 2001, '02 and '03 tax cuts have already kicked in, but the principal benefits for upper incomes and corporations kick in from 2005 through 2009, including the elimination of federal estate taxes. When all of that is finished, the richest Americans will pay a smaller share of total taxes than their share of total incomes. If America's millionaires pay an outsized share of federal income taxes, it is because they have an outsized share of the income. Between 1979 and 2001, the after-tax income of the richest 1 percent of Americans rose 139 percent while the after-tax income of the poorest fifth rose 8 percent and the middle fifth 17 percent. In all his speeches touting the benefits of his tax cuts for working Americans Bush uses the "average" tax cut for individuals and businesses. But the median tax cut is less than half the "average," which is weighted by cuts in the millions of dollars for many of the richest people. Only about 2 percent of small businesses get a dollar of tax relief from the reductions in the top tax rates for businesses. But here is what Kerry should be telling everyone. If Bush had his way, the super rich would pay virtually no federal taxes ever again and ordinary millionaires very little. Bush wanted to exempt all income from capital gains, stock dividends and interest from federal income taxes. There were enough sane Republicans and Democrats in the U.S. Senate to thwart him. Ruefully, George W. Bush may never be forced to explain in a national forum how that would be good for his countrymen.

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