The GOP Tax Fraud
Life in an Intellectual Vacuum“It’s always the case that lower taxes are better than higher taxes,” a spokeswoman for House Majority Leader and chief GOP taxophobe Dick Armey declared last week. This vapid bit of fiscal philosophy lies at the core of the intellectual vacuum that masquerades as Republican Party economic policy. With Congress back in session and a hefty budget surplus on the table, Republicans in Washington and elsewhere are once again confusing tax relief with statesmanship.
Among life’s little nuisances, taxes are an easy target, but they are also the engine of the social compact we call democracy. Through representative government we accomplish together what we cannot hope to accomplish separately; taxes pay the freight. This is elementary textbook civics, although ever since Ronald Reagan adopted class war as a defining approach to economic policy and cast progressive taxation as the enemy of market capitalism, conservatives have worked hard to rewrite conventional wisdom. It is sometimes said that disdain for taxes is a peculiarly American phenomenon, as though a repudiation of social democracy is somehow culturally formed. Baloney. Measured skepticism toward swelling public bureaucracy is healthy and appropriate. Present-day conservative anti-tax extremism is just, well, silly.
Unfortunately, silly does not mean inconsequential. With control of Congress, tax-cutting Republicans will grandstand on tax reform this fall as a way to put the issue front and center in next year’s elections. Dick Armey and company are standing behind a high-nine-figure tax cut proposal that is utterly divorced from the reality of looming Social Security and Medicare insolvency, crumbling schools, and persistently elusive health insurance for millions of Americans. The GOP plan will almost certainly fail to become law, given Bill Clinton’s promise to veto. TheWhite House is backing a sizeable $300 million tax cut alternative, which ordinarily might be a harbinger of compromise on a substantial tax cut this year. But Senate GOP leader Trent Lott is playing hardball, vowing that a Clinton veto on the almost $800 million Republican proposal will kill tax relief until after next year’s election. Lott apparently is willing to sacrifice a tax compromise in 1999 in order to manufacture a “mine is bigger than yours” tax cut issue for the 2000 election cycle. At least that’s the game he’s playing right now.
Into the mix comes some new, sobering data showing that the income gap between rich and poor in America continues to widen. We hear month after month how great the economy is doing, and in the last couple of years there is evidence that even low-income workers are finally starting to see some modest improvement after almost two decades of declines in real earnings. But the new numbers show that earnings gains for wealthy Americans are significantly outpacing those of low- and middle-income workers.
According to the new analysis by the Center on Budget and Policy Priorities (CBPP), 90 percent of the increase in national income since 1977 has gone to the wealthiest 1 percent of households. The incomes of wealthy Americans are rising at twice the rate of those in the middle class. A few more numbers bring the expanding income gap into clear focus: Between 1977 and 1999, inflation-adjusted income (after taxes) for the one-fifth of households with the lowest income has declined by 12 percent, and for the middle fifth of households has declined by more than 3 percent. For the highest income one-fifth of households, income (again, adjusting for inflation) has grown by more than 38 percent, and for the highest 1 percent of earners, the increase is almost 120 percent.
What do these figures mean? They tell us that for all the rhetoric of economic growth and prosperity that spews from the mouths of Democrats and Republicans alike, the benefits of prosperity go almost exclusively to the country club set. Conservatives often dismiss income and wealth gaps as healthy by-products of entrepreneurial free-market capitalism. Pull yourself up by your bootstrap.com, and you too can share the payoff of a winner-take-most economy. Sounds lovely, but the story in the numbers is that wealth is more concentrated, not dispersed. It turns out the rising tide lifts only those boats already in port.
The irony for the current tax debate is that the CBPP report places the blame for rising income inequality squarely on the cumulative effect of tax cuts for the wealthy over the past two decades – precisely the ongoing intention of today’s Congressional Republicans. Their tax plan endorses the status quo loud and clear – the just society is one where the rich get richer, and everyone else loses ground. The fallacy of trickle-down economics is alive and well.
The numbers are depressing, but politically there’s room for optimism. Trickle-down tax policy is a loser for the GOP. Polls consistently show the voting public is not nearly as hungry for big tax cuts as the Republican Party’s leadership. However much Dick Armey and Trent Lott might try to dress it up as tax relief for the middle class, the GOP tax plan is yet another naked giveaway aimed primarily at wealthy taxpayers that just won’t pass the smell test beyond Wall Street. Working class and middle class voters in 2000 will scarcely be fooled any more than they were in 1996 and 1998 into believing that Republicans have their economic interests in mind.
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