Taxing Times

This tax season, Messrs. Bush and Cheney are doing very nicely, thank you.

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President Bush and Vice President Cheney, whose wealth keeps them comfortably seated in the upper one percent of the population, got pretty good news this week from the IRS, which asked their households for less income tax than they paid last year.

The president paid 28 percent of his $822,126 income in taxes for 2003, more than Cheney, who parted with one-fifth of his and Lynne’s annual $1.3 million. That’s nine percent less than Cheney paid in 2002.

The White House, whose policies have led to record budget deficits and imperiled Social Security and Medicare programs, likes to tout its radical tax cuts, passed in 2001 and 2003, as a boon to working families. John Kerry takes the opposite view, and plans to help fund starved government programs in part by rolling back some breaks for the wealthiest taxpayers. The evidence is on Kerry’s side, but which line will voters buy?

One quarter of people polled by CBS News and the New York Times last month said Bush made their taxes rise, while 22 percent reported the opposite and 46 percent found no change.

Meanwhile, the Bush tax cuts are eating at least a $200 billion hole–a sum, by the way, equalling the combined salaries of four million average workers–in the $521 billion deficit. Critics of the Bush tax cuts aren’t hard to find.

Pulitzer Prize-winning Times journalist David Cay Johnston, who recently wrote a book on tax disparities, outlined for the San Francisco Chronicle how the system is set up to “Stroke the Rich:”

The federal tax system that millions of Americans are forced to deal with before April 15 is not at all what you think it is. Congress has changed it in recent decades from a progressive system in which the more one earns the more one pays in income taxes. It has become a subsidy system for the super rich.

Through explicit policies, as well as tax laws never reported in the news, Congress now literally takes money from those making $30,000 to $500,000 per year and funnels it in subtle ways to the super rich — the top 1/100th of 1 percent of Americans.

People making $60,000 paid a larger share of their 2001 income in federal income, Social Security and Medicare taxes than a family making $25 million, the latest Internal Revenue Service data show.

However, some conservatives, like Bruce Bartlett of the National Center for Policy Analysis, say liberals have it all wrong. “In short, the poor paid half as much of the federal tax burden in 2001 as they did in 1984, while the rich paid about 50 percent more,” he says. What he overlooks is that the wealthiest one percent only paid more money in taxes because their earnings have risen drastically over the last 20 years, outstripping the rest of America.

With trends like these biting an ever larger chunk out of meager salaries, how can people subsisting on $16,000 a year possibly afford to pay rent and eat? Maybe that’s because starving the government has been the goal of many conservatives all along.

Remember Ronald Reagan’s supply-side “trickle-down” theory, according to which tax breaks for the richest would boost the economy and eventually reach the lower social rungs, uplifting the impoverished? According to Paul Krugman, it was — and is — really a cover for a hardline political doctrine that aims to eliminate all federal social entitlement programs — “starving the beast” of government, as he puts it — including Social Security and Medicare.

The opinion of investment advisor Thomas Nugent, in the right-wing National Review, reflects the Bush team’s belief:

Here’s the game the Democrats are playing: To avoid increasing taxes on their big-time constituents they are advocating higher income taxes on working Americans. And with the money they raise by taxing hard-earned dollars they plan to either shrink the budget deficit or fund their pet spending projects.

The reality is, higher income-tax rates discourage work and lower standards of living; they dishearten the entrepreneurs in our society who are trying to improve their own standards of living and the situations of their families. Bush understands this. Rather than rewarding the rich, his tax-rate cuts increase the reward for work.

You might think that the IRS would scrutinize those who can afford to pay their fair share, but there aren’t enough auditors to investigate fraud by the rich. Instead, people making $16,000 or less are eight times likelier to be audited than mega-millionaires, according to Krugman.

Ironically, instead of shrinking the government, Dubya’s administration has expanded it in unprecedented ways–such as creating the world’s largest bureaucracy (Homeland Security). The Bush administration also passed a Medicare bill projected to cost $130 billion beyond the original $400 billion forecast. A tax cut born of a campaign to starve the beast of government is instead creating a monster.

In a New York Times Magazine piece (archived) last September, Krugman spelled out the result of the three-decade push by hard-nosed conservatives such as Grover Norquist to trim taxes:

The astonishing political success of the antitax crusade has, more or less deliberately, set the United States up for a fiscal crisis. How we respond to that crisis will determine what kind of country we become.

If Grover Norquist is right — and he has been right about a lot — the coming crisis will allow conservatives to move the nation a long way back toward the kind of limited government we had before Franklin Roosevelt. Lack of revenue, he says, will make it possible for conservative politicians — in the name of fiscal necessity — to dismantle immensely popular government programs that would otherwise have been untouchable.

In Norquist’s vision, America a couple of decades from now will be a place in which elderly people make up a disproportionate share of the poor, as they did before Social Security. It will also be a country in which even middle-class elderly Americans are, in many cases, unable to afford expensive medical procedures or prescription drugs and in which poor Americans generally go without even basic health care. And it may well be a place in which only those who can afford expensive private schools can give their children a decent education.

David Cay Johnston warns:

All of this is having a devastating impact on America, which the preamble to our Constitution says was created to “promote the general welfare.” Until Americans decide to take back their democracy and become actively engaged in politics, the super rich will continue to rig the tax system for their benefit only.


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