by catbear » Fri Nov 18, 2005 7:16 pm
<!--EZCODE AUTOLINK START--><a href="http://zmagsite.zmag.org/Images/rasmus1105.html">zmagsite.zmag.org/Images/rasmus1105.html</a><!--EZCODE AUTOLINK END--><br><br><br>After more than four years of incessant tax cuts for the wealthy and most powerful corporations, totaling in excess of $4 trillion since 2001, George W. Bush and Co. are now preparing to come back for an even bigger tax cut feast at the expense of workers and consumers in the U.S. <br><br>Having rammed through Congress record tax cuts on an annual basis from 2001 through 2004—more than 80 percent of which will have been distributed to the wealthiest taxpayers and corporations by the end of the decade, according to the Institute on Taxation and Economic Policy—Bush’s corporate backers are in the process of regrouping and consolidating in preparation for yet another big tax cut push in 2006. <br><br>In his second term, Bush’s first target is to make permanent the $4 trillion in tax cuts already passed, starting with total repeal of the Estate Tax now in its final phase of passage in Congress. Should Bush and corporate America succeed in repealing the Estate Tax and making permanent beyond 2010 Bush’s first term tax cuts, estimates by the nonpartisan Center on Budget and Policy Priorities are that the total long term cuts will amount to no less than $11.6 trillion—80 percent of which once again will accrue to the wealthiest 20 percent of households and the largest corporations. <br><br>To give a sense of the magnitude of the $11.6 trillion tax cuts: defeating Bush’s goal of making the tax cuts permanent and rescinding the cuts to date would eliminate Bush’s alleged $3.4 trillion shortfall in Social Security, would fully resolve the growing crisis in Medicare funding, and would provide free prescription drugs for all people in the U.S. in need—not just partial payment for drugs for those in retirement. <br><br>Bush’s second target, however, may exceed even the mind-boggling $11.6 trillion. The second primary objective is to totally restructure the entire tax code before leaving office. The campaign for the second target kicked off with the release on September 30, 2005 of the final report of Bush’s appointed special Advisory Panel on Tax Reform. Expectations are that the Panel will recommend, and Bush and Congress eventually propose, not only further breaks for the wealthy and corporations but also a scaling back of many of the token tax cuts given to workers and consumers between 2001-04 that were considered politically necessary at the time to ensure passage of tax cuts for the wealthy. In addition, the Panel’s report is expected to launch a fresh, new assault on the few benefits in the federal tax code that working class households have been able to take advantage of for many years—such as home mortgage interest, state and local tax deductions, and deferral of taxes on health insurance premiums. <br><br>After more than four years of George W. Bush tax cuts it should now be abundantly clear that the U.S. is in the midst of a major, radical restructuring of the tax system. The direct consequence of that tax restructuring has been a shift in the federal and overall tax burden—a “Great American Tax Shift”—between classes in the U.S. <br><br>The Shifting Federal Tax Burden <br><br>The federal tax structure is comprised of four main elements: the personal income tax, the corporate income tax, the payroll tax for Social Security, and excise taxes. Excise taxes are quantitatively insignificant in the total federal tax mix and may be excluded. The major elements therefore are the personal and corporate income tax, and the payroll tax. <br><br>Some argue that since the payroll tax represents income earmarked for distribution back to workers when they retire and start collecting Social Security it is not really a tax but an income transfer program. But that’s true only in theory. The payroll tax has today a dual character. On the one hand, it is a transfer program. But it is also a de facto income surcharge tax of 12.4 percent levied on more than a 100 million workers. This has been the case at least since 1983, when the payroll tax was raised by record levels producing more than a $4 trillion surplus (in principal and interest) over the past 22 years. That $4 trillion surplus collected by the payroll tax since 1983 has been transferred from the Social Security trust fund and spent by the federal government to offset its general budget deficits for the last 22 years—deficits caused in turn primarily by two decades of tax cuts for the rich and to pay for chronic, bloated defense spending since 1983. The Social Security surplus has thus been spent for general budget purposes—that is in a manner much like revenues generated by other federal taxes. In this respect the payroll tax has functioned no differently than the personal and corporate income taxes. That part of the payroll tax that has created the $4 trillion surplus has thus performed as a de facto income tax—a tax levied only on workers earning up to the annual income limit (today $90,000) and exempting all those earning incomes over $90,000. It has functioned as an income tax with a ceiling. The part of the payroll tax that has financed retirement benefits for Social Security recipients (i.e. the lesser part of the tax) may still be considered an income transfer; but the greater part of the payroll tax, that part that has created the $4 trillion surplus, is a targeted income tax surcharge. It is therefore totally appropriate to consider the payroll tax surplus in any assessment of the total federal tax burden, and to include it as an integral part of the shifting of that burden between workers and non-workers and corporations. <br><br>It is important to understand that the full 12.4 percent payroll tax is paid by workers, despite employers technically contributing half, or 6.2 percent. Numerous studies show, for example, that employers reduce compensation to labor in other ways in order to offset their 6.2 percent contribution to the payroll tax. Corporations don’t pay payroll taxes; they collect them from their workers by reducing workers’ other forms of compensation in an equivalent amount and then pass on that collection, along with workers’ 6.2 percent direct deduction, to the federal government. <br><br>The Corporate Tax/Workers’ Tax Shift <br><br>As of 2005 the corporate income tax has fallen to barely 6 percent of total federal revenues, while the payroll tax has continued to rise. A tax shift has therefore clearly taken place between the corporate income tax on the one hand and the payroll tax on the other, with workers paying an ever-increasing relative share of federal tax revenues and corporations a corresponding lesser share. As a consequence, in turn, corporate income has risen relative to workers’ income, which has fallen. <br><br>The shift in the total federal tax burden has occurred in yet another, albeit less apparent way. Table 1 shows a stable 44 percent of total federal tax revenues collected from the personal income tax. But both workers and non-workers pay the personal income tax. What is not readily evident in that stable 44 percent range for the personal income tax is a second shift that has been occurring over the same period. <br><br>Major tax cut legislation passed since the 1960s have been overwhelmingly weighted in terms of their distribution effects in favor of wealthy households and corporations. Approximately two-thirds of the roughly $11.2 billion 1964 tax cut under President Lyndon Johnson went to the wealthiest income groups and corporations. Under Nixon in 1971, $8 billion of a $9 billion tax cut went to corporations. Under Nixon and Carter in the 1970s inflation and “bracket creep” nearly doubled the total federal tax burden for a typical median working class family while barely affecting the wealthy. <br><br>Reagan’s 1981 tax cut amounted to more than $750 billion; $600 billion of that represented cuts in personal income taxes. The lion’s share of that $600 billion went to the wealthiest 5 percent; 60 percent of all taxpayers—those representing annual income levels of less than $20,000—actually experienced a net increase in taxes. Another 20 percent with income levels between $20-$30,000 received paltry cuts averaging only $26 a year. Meanwhile, the wealthiest 20 percent—the richest 5 percent in particular—received well over 80 percent of the $600 billion in personal income tax cuts passed by Congress under Reagan that year. <br><br>From 1988 to 2000, under George Bush senior and then Clinton, cuts in personal income taxes for the wealthiest households continued to grow, but now were enabled primarily by the passage of widespread tax shelters and loopholes instead of cuts in tax rates per se. As a result, for example, between 1990-1997 the number of individuals who filed but did not pay any tax increased from 24 to 29 million. This compares to the 1950-1970 period when the number of filers who paid no taxes declined by 3 million. Offshore tax havens in the Caribbean and elsewhere that sheltered $200 billion of income for wealthy Americans in 1983 grew rapidly thereafter, to where more than $6 trillion remains hidden from the IRS offshore today. The one major tax cut legislation of the 1990s, Clinton’s 1997 Tax Relief Act, accelerated the reduction in income taxes for wealthy households by significantly cutting capital gains, estate, and gift taxes. It is estimated that Clinton’s 1997 Act reduced personal income taxes by $100 for every upper income household, compared to only $5 for a typical working class median income household. <br><br>Table 2 shows the federal tax burden (defined as Income and Payroll taxes paid) for a median income (i.e., working class) family in comparison to a wealthiest 1 percent family’s federal tax burden. <br><br>Bush’s First Tax Cut Package <br><br>Bush’s first tax cut package in 2001 cost taxpayers approximately $1.7 trillion. Nearly $1 trillion involved cuts in the top rates of the personal income tax; 72 percent of all taxpaying households and 95 million taxpayers (virtually all workers, small businesses and self-employed) received none of that $1 trillion; 71 percent of the cuts went to the wealthiest households earning more than $147,000 a year. Another $138 billion of the cuts involved major changes in the estate tax, which benefited less than 1 percent of all taxpaying households. <br><br>Whereas Bush’s 2001 tax cuts targeted wealthy individuals, his 2002 cuts benefited primarily corporations and businesses, providing four tiers of various kinds of depreciation tax write-offs for businesses and expanding corporate tax loopholes. The latter resulted in a flood of tax rebates to corporations by the government. As a result of Bush’s 2002 tax cuts not only did many large multinationals no longer have to pay taxes at all, but they were actually given refunds as far back as five years by the U.S. government. In 2003, companies like Boeing received a $1.7 billion tax rebate from the federal government; the banking giant, JP Morgan Chase received $1.38 billion in rebates; AT&T $1.39 billion. <br><br>In see-saw fashion Bush’s 2003 cuts targeted wealthy individuals once again, with major reductions in the taxation of dividends and capital gains, as well as further cuts in depreciation for businesses and even more tax subsidies for corporations. The cost of the dividend and capital gains cuts amounted to at least another $800 billion for the decade. <br><br>The net gains from the first three years of Bush’s tax cuts for the lowest 80 percent of income groups—i.e., virtually all working class and small, self-employed businesspeople—are estimated at between only 10-14 percent of the total tax cuts of more than $3.5 trillion. <br><br>Finally, in 2004 the focus shifted once again to corporate tax cuts and concluded with another roughly $350 billion, according to conservative estimates (and more than $500 billion by others), in tax cuts for the largest corporations—including a virtual tax holiday that allowed more than $650 billion in profits illegally held offshore by large multinational corporations to be brought back to the U.S. and taxed at a minimal 5.25 percent instead of the normal 35 percent corporate rate. <br><br>Nor did the tax cut juggernaut on behalf of corporations and the wealthy slow in 2005. In lieu of highly visible comprehensive tax cut packages that occurred on an annual basis during his first term, further corporate tax cuts continued in 2005 on an industry-by-industry basis. Most notable was the recent energy industry legislation benefiting big oil companies already reaping super-profits as result of near-monopoly price gouging; multi-billion dollar subsidies granted to the tobacco industry to help cover their losses from legal suits; and other industry tax sweeteners granted in order to garner broad industry support for passage of the Central America Free Trade Agreement, CAFTA, in July 2005. <br><br>The Estate Tax Boondoggle <br><br>In late summer 2005 attention focused on Bush efforts to repeal what little remained of an Estate Tax. Prior to 2001 the Estate Tax applied to only 2 percent, or 52,000, of the 2.5 million heads of households who died that year. Fully 98 percent of households were thus exempted from the Estate Tax altogether even prior to Bush’s cuts in the tax. And for the 2 percent for whom the tax still applied in 2000, there was a $1.35 million exemption before a 55 percent tax rate on the estate applied. <br><br>Following Bush’s Estate Tax cuts in 2001, however, fewer than 1 percent remained subject to the Estate Tax. In 2005 that represented only 13,700 of the more than 2.6 million heads of households projected to die this year. Thus nearly 40,000 households who were once subject to the tax prior to Bush are now excluded from it under the 2001 revisions. Moreover, of those 13,700 still subject to the tax, their exemption level has been raised to $4 million in 2005 and their tax rate reduced to 45 percent. Furthermore, under the current law, by 2009 the exemption will rise to $7 million and only 2,400 will be subject to the tax. <br><br>In other words, only the very rich today are at all subject to the Estate Tax as it now exists. Notwithstanding this fact, Bush and his wealthy backers have been pressing throughout 2005 for repeal of even today’s watered-down Estate Tax. Even when that tax is scheduled to disappear altogether after 2009 under current provisions, they prefer not to wait four more years. The Republican House, with the votes of 42 Democrats, thus passed immediate and permanent repeal of the Estate Tax in April 2005. Only a threat of filibuster in the Senate now stands between waiting four more years for its eventual demise and its immediate, permanent repeal in 2005. <br><br>It is estimated that a full and permanent repeal of the Estate Tax will amount to approximately $1 trillion in lost tax revenue and interest over the next decade, followed by trillions more over subsequent decades. <br><br>Hurricane Katrina has recently dealt a wild card into the Estate Tax cut game, however. With what looks like $500 billion needed to rebuild the Gulf Coast, it will be difficult (though not impossible) for pro-corporate/pro-wealth interests to pass another $1 trillion tax cut for the wealthiest 1 percent of taxpayers at the same time. <br><br>As a contingency, Bush and the pro-wealth interests in Congress have developed a fall back position nearly as generous in the event permanent repeal is not immediately possible. Led by Republican Senator Jon Kyle of Arizona, an alternate proposal on the table in the Senate at present is to raise the Estate Tax’s exemption immediately to $7 million (or higher) and immediately reduce the 45 percent tax rate to a 15 percent rate equal to the tax on capital gains. That would produce a tax cut for the wealthiest 0.3 percent households of more than $700 billion over the coming decade alone, with more to follow. And even that $700 billion is probably an underestimation, since other provisions in the legislation and before the courts at present will render state-level Estate Tax laws that now exist null and void as well. <br><br>However the final results are calculated and whatever the details of the final outcome, it is virtually assured that another multi-trillion dollar tax cut for the wealthiest taxpayers is about to pass within the next 12 months. <br><br>Radical Restructuring of the Tax Code <br><br>Attacking working class incomes at the point of production, industry by industry and company by company, is often a more drawn out and more risky process for corporate America. There is more uncertainty. There is always the possibility of disruptions of production. Unions, should they exist, must first be tamed, neutralized, or gotten out of the way. Events currently in the airline industry are an example of how messy the latter can sometimes get. Coordination among companies and even within management of a company is complex and unpredictable. Corporations abhor unpredictability. Better to pay lobbyists and politicians hundreds of millions of dollars and do the job centrally through the political-legislative process. Of course the two approaches—from the bottom up and from the top down through the legislative-political process—are not mutually exclusive. Both approaches have been applied with significant success by corporate America over the past quarter century. <br><br>With only three years left in Bush’s second term (and with only one year before the 2006 Congressional elections) an even greater conflict over shifting taxes and incomes between classes in the U.S. is about to unfold. As this article is being written, Bush’s special Presidential Advisory Tax Panel is releasing its long awaited report with recommendations on fundamentally changing the entire U.S. tax code. The Bush-Corporate grand plan is to lock in pro-corporate and pro-wealth provisions in a radically restructured tax code for generations to come—just as the Bush plan is to stack the Supreme Court with pro-corporate forces, to fundamentally restructure the general retirement and health care systems, and to establish U.S.-dominated global trading blocs for a generation to come. <br><br>A great theft of workers’ incomes by corporate America—and the ranks of the wealthiest 10 percent who stand behind those corporations and benefit directly from them in so many ways—has been underway in earnest since 1980. When it comes to tax policy benefiting corporations and the wealthiest Americans, George W. Bush is Ronald Reagan writ large— in this case a magnitude of at least five times. Whereas Reagan ensured the transfer of hundreds of billions of dollars through manipulating the tax system to the benefit of his prime constituency of the wealthiest corporations and individuals, George W. Bush has ensured the transfer of tens of trillions to that same constituency. <br><br>The economic class war now intensifying under George W. Bush is about to enter an even more aggressive phase. The conflict over the radical restructuring of the tax system, and its impact on shifting incomes between classes in the U.S., will be at the center of that continuing economic class war. <br><br><br>--------------------------------------------------------------------------------<br>Jack Rasmus’s latest book is The War At Home: The Corporate Offensive From Ronald Reagan to George W. Bush. <br> <br> <br> <br> <br> <br> <br> <br> <br> <p></p><i></i>
