The final year of any long term tax adjustment is the key to any understanding of the proposition's overall effects on the individual taxpayer and the economy, in general. President Clinton has demanded that any tax cuts be tilted overwhelmingly towards the lower and middle- classes, a requirement that GOP leaders agreed to during a May 2 budget meeting at the White House. The bills that have passed each chamber, however, shows that what the leaders in Congress agree to and what they attempt to force into law are usually two different matters.
The Treasury Department released a study (Washington Post, July 14) which analyzed the three tax proposals offered by the House, Senate and White House. This study revealed that, in the tenth year of implementation, the House bill would provide 55% of its benefits to the very wealthy and corporations (through the reduction of the previously mentioned capital gains, alternative minimum tax payments and estate taxes) the Senate's would provide 53% and President Clinton's only 10%. Conversely, the middle and lower classes would share, through education and child tax credits, 38% of the House's plan, 43% of the Senate's but a huge 83% through the President's.
The Center on Budget and Policy Priorities estimates that the loss in revenue to the Treasury in the ten years after 2007 would be approximately $700 billion if the House's blueprint is adopted, $650 billion in the Senate's scheme and only $450 billion in the White House's plan.
Treasury Secretary Robert Rubin predicts an "explosion" in the federal deficit in 2007 if either chamber's plans are enacted and describes an economy in rubble should that deficit become reality. This will occur at nearly the same time as the beginning of the baby boomers entry into the Social Security and Medicare programs, two other systems which Congress is basically trying to dismantle rather than make the tough choices they will require to be saved and available for the future lower and middle-classes.
The Republican leadership has been trying to soften the appearance of these huge differences in benefits by saying that it should come as no surprise that those who pay the highest taxes have the right to be the major beneficiaries of any tax cuts. This argument, however, doesn't take into account the chasm that has dramatically widened between the rich and the rest of America since 1975 and the fact that the incomes for the top 5% of taxpayers has risen by a unbelievable 54.1% while the bottom 60% have averaged an increase of only 6.4% (adjusted for inflation). The wealthy will not be burdened with new taxes if the middle and lower-class taxpayers are given the cuts, they will simply continue to pay what is now expected.
President Clinton listed four "basic tests" that he would administer to any tax bills offered by Congress to determine if they are sound economic policy: fiscal responsibility; fairness; contribution to growth of the economy; and inclusion of the education tax cuts that the Congressional leaders approved in May. Neither of the bills that Congress has offered can pass these tests. With a glowing economy that has the Federal Reserve Board considering raising interest rates to try to cool down, the wealthy have very, very little to complain about in regards to the growth of their income. It is the rest of America which desperately needs the direct intervention of the government to keep them from slipping even further behind in buying and saving power.
The answer as to why, while trying to balance the federal budget, Congress and the President are so eager to also reduce the federal revenues? I believe that the obvious and dreadful answer is that both branches, now held by Republicans or Republican wanna-be's, while trying to make government "smaller", are also searching for ways to eliminate the programs that only benefit the neediest in America. Since the far right has been able to demonize the poorest citizens in this nation, to the delight of the Pat Buchannon's in the republic, destroying any assistance to them in exchange for a couple extra dollars per American each year is now seen as reasonable. It follows that the greed and nastiness that they have been able to convince America is a new and holy way of life will replace the compassion that was once the pride of the American people. Hence, conspire to reduce federal income, then use that as an excuse to kill off any help for those who most need it and pretend that this meanness is "fiscal responsibility". So very sad!
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