"When you hear them say, tax the rich, be careful," warned George W. Bush in a speech on Thursday. "The rich hire lawyers and accountants for a reason, because they don't want to pay. And you get stuck with the tab. But we're not going to let him stick you with the tab."
Well he ought to know about hiring lawyers and accountants. But the rest is pure deception.
In fact, the problem is the opposite of what Bush asserts. It is that his tax cuts that are shifting more of the burden of taxes to middle-class and working-class households.
This is important because the Bush team is counting on buying millions of votes with their tax cuts. Most people know that the biggest chunk of the tax cut goes to the rich and the super rich: about a quarter of the 2001-2003 tax cuts went to just 1 percent of taxpayers. These are people with an average income of more than a million dollars a year.
But there are many people who think, who cares if they give away billions to rich people who don't need it, so long as I can get a few hundred dollars in the deal? But they are mistaken.
What they don't understand is that someone is going to have to pay those taxes that rich people are no longer paying. And that someone is them. The federal government under the Bush administration has done nothing to reduce spending, and in fact has vastly increased expenditures on the military and the war in Iraq. The result is a near-record budget deficit -- at 5 percent of GDP, it's the third largest in the post-World-War II era.
The deficit is even bigger if we compare it to federal government revenue, excluding the revenue from Social Security and Medicare payroll taxes. This is a better measure of the deficit problem, because money that comes out of our paychecks for Social Security and Medicare is by law reserved for those benefits, and will ultimately be used for exactly that.
The budget deficit is now more than 40 percent of federal revenues, excluding Social Security and Medicare. This is an enormous gap that will have to be narrowed drastically at some point, and middle class taxpayers will "get stuck with the tab."
The Bush team's tax policy seems deliberately designed to shift the burden of taxes from the richest taxpayers to those who are, in their estimation, lower down on the food chain.
Getting rid of the estate -- that is, inheritance -- tax benefited less than two percent of taxpayers; about half of them got a windfall averaging $3.4 million. Reducing capital gains taxes is another giveaway to the rich, enabling billionaires to pay a lower marginal tax rate on their income from stock sales than that what a nurse or truck driver pays on their wages. And then there is the tax cut on stock dividends: many people thought that they would get at least something from this, since they own at least some stock in their retirement accounts. But they were tricked here too: if you have a retirement account, your income from dividends will be taxed when you withdraw the money for retirement. Only those who own stocks outside of retirement accounts -- overwhelmingly very rich people -- got a break.
Of course there were some benefits for the middle class in the tax cuts: the middle 20 percent of taxpayers got an average reduction of about $800 last year. But this will surely be taken back in the near future. The country's gross federal debt -- relative to the economy -- is at its highest level in 50 years, and not even the United States government can pile up debt at this rate for very long.
While the economy did receive some stimulus from these tax cuts -- as opposed to doing nothing -- it was very little for the trillions of dollars of present and future revenue that was sacrificed. Much more could have been achieved with a fraction of this money going to beleaguered state governments and people with less income than the rich. The real purpose of the Bush team's tax policy was to rewrite the tax code to create, as Mr. Bush calls it, "an ownership society": one in which owners do not pay taxes, but workers do.
Mark Weisbrot is author of Social Security: The Phony Crisis, and is Co-Director of the Center for Economic and Policy Research, a nonpartisan think-tank in the nation's capital (www.cepr.net). Readers may write him at CEPR, 1621 Connecticut Ave NW, Suite 500, Washington, DC 20009-1052 and e-mail him at Weisbrot@cepr.net.