THE RETURN OF THE REAGAN TAX CUT
a statement of the Committees of Correspondence for Democracy and
Socialism (CCDS)

Before addressing the Bush tax cut proposal, we want to place this issue in its larger context. We, the Committees of Correspondence for Democracy and Socialism, are not opposed to taxes, nor do we want to suggest that there should never be cuts in any taxes. Rather, the overarching goal must be a commitment to a federal budget that is designed to meet the real needs of the people of this country. As we examine the Bush proposal we have to ask how our tax dollars are used, how budget priorities are set and where the money for the federal budget comes from. And, in no small way, all of this is tied to who owns and controls the wealth of this nation.

By now it is clear that President Bush is trying a "Reagan". He wants to cut taxes for the rich by so much that the public sector will face years of austerity. The forecast of huge surpluses over the coming decade is widely understood to be problematic, the incidence of the benefits of the cuts widely recognized as unfair, but the substantial damage of his Reaganesque strategy go less commented upon.

George W. says "we can do it all." The surplus is so big that we can pay down the national debt, build a Star Wars missile system, fund at least partial privatization of Social Security, abolish the "death" tax and do all manner of things. The reason to rush the tax cut part through first and fast is that the numbers say no such thing. His tax cuts are now being costed out by nonpartisan experts at not $1.6 trillion but more than $2.6 trillion.

Having it all does not include continuing government spending at current rates. His budget assumes an actual drop in spending per citizen and since he has targeted some areas for increases this means serious cuts elsewhere. Mr. Bush's proposes cuts in ten federal agencies. Eight of fifteen cabinet level departments would see their budgets cut. Without a budget debate the tax cut will preempt expenditures.

About two-thirds of the projected $5.6 trillion in surplus is expected to occur in the second half of the decade, and guesstimates that far out are undependable. Three years ago these same forecasters saw deficits for "as far as the eye can see." In early 1997 the Congressional Budget Office estimated the federal deficit would be $147 billion for fiscal 2000. Instead there was a surplus of $236 billion, an error of well over a third of a trillion dollars on a three year forecast. Is it unreasonable to think the ten year forecast could be off by more than the amount of the projected surplus?

The President's misleading claim that people with the smallest income will get the highest percentage reductions is a classic how-to-lie-with-statistics argument. Because some low income people who pay a small amount in income taxes will now pay no federal income tax, the percentage decline can look impressive. The amount in dollars is not. Most low income workers get nothing because they pay no federal income taxes. They do however pay an increasingly heavy burden of regressive payroll taxes and the best tax reduction for them would be an immediate cut in this burden. Eighty percent of working Americans pay more in payroll taxes than they do in income taxes. Cut payroll taxes, benefit this eighty percent. The President is exploiting a fear of recession and sees "a warning light flashing on the dashboard of the economy". A payroll tax cut is the way to put money into the economy more quickly and to increase spending now.

Most African-American and Latino kids ive in families which will receive nothing from Bush's proposal which is, he says, "for everyone." Under the Bush plan, the wealthiest 1 percent of families receive over 40 percent of the money. The president continues to say that the average taxpayer would save $1,600 a year. Nine out of ten taxpayers, it turns out, are not "average" since they would receive less than that. Folks around the $50,000 a year income mark would get enough for a new muffler for their used car as Senate minority leader Daschle suggests, versus enough for a new Lexus for the over $300,000 set.

The reason the polls show a consistent lack of general interest in an income tax cut is that most Americans in taxable 2000 will pay less than ten percent of their income in federal income taxes. The CBO estimates that the wealthiest 20 percent of families paid more, but only 16.1 percent of their income in federal income taxes in 1999, about the same as in the late 1970s, hardly the "overpayment" of which the President misspeaks. The Treasury Department estimates a four person family with a median income of $54,900 paid 7.46 percent in 1999, the lowest rate since 1965. Social Security and Medicare taxes now equal 9 percent of income on average, but more from lower income people and far less from the affluent. This is of course why the President doesn't talk about the tax burden but only personal income taxes.

The President's plan includes eliminating the inheritance tax (redubed "the death tax" - liberals, they infer, want to hurt the dead). The estate tax is irrelevant to 98 percent of Americans since the tax is irrelevant in 98 percent of the cases of death in the United States where no taxes are paid. The current law exempts estates up to $675,000 (to be raised to a million in 2006 under existing law) and estates passed to spouses are not taxed at all - the other two percent or so pay an average estate tax of 17 percent. To say that "fairness" requires eliminating such a tax is twisted. As many as 14 of the 17 members of the Bush cabinet are wealthy enough to gain from elimination of the tax. Dick Cheney's heirs, from information on his disclosure forms, would save perhaps $45 million in taxes if the estate tax is repealed. Repealing the estate tax by the tenth year of Mr. Bush's time frame, would account for nearly 25 percent of the lost revenue from the entire tax cut plan.

At last year's New York's Alfred Smith dinner George W. Bush stated, "This is an impressive crowd: the haves and the have-mores. Some people call you the elite. I call you my base." The Democrats could use the Bush tax proposals as a way to establish a clear difference. They could offer as an alterative a cut in the payroll tax and an increase in social spending targeted particularly to education and health care which the majority of the people in this country want. They could insist on a smaller, but still significant amount for debt reduction so that it will be easier to offer additional progressive spending programs and working class tax cuts in the future if the economy slows more.

The audacity of the Bush Plan is still not generally grasped. Bush is tying the hands of presidents and congresses to 2010 and constraining possibilities beyond that by making decisions now based on bogus forecasts and instituting regressive policies which will be as hard to undo as were those of Ronald Reagan. The Democrats could avoid another debacle if they have the courage to offer a real choice this time around based on a bottom up working class politics.

WHAT YOU CAN DO:

1. Make sure your Senators know that you oppose the tax giveaways to the rich in Bush's plan, especially the repeal of the estate tax. (The Senate switchboard number is 202-224-3121. They can connect you to your Senator's office.) According to information from United for a Fair Economy, the Senators from California, Georgia, Louisiana, Maine, Michigan, Missouri, New Jersey, Oregon, and Washington are swing legislators in this fight. If you live in one of these states your calls are critically important.

2. Organize a delegation to meet with your Senators. Many elected officials are back in their districts during the Passover and Easter break (April 9-17th).

3. Write a Letter to the Editor of your local newspaper, or an article for any organizations you are part of. Help make the debate about the tax cuts as public as possible.

4. Even though the House of Representatives has already voted on the Bush proposal, be sure to keep the pressure on your representative. There is a possibility that the Senate will pass a bill that differs from the House bill which means it will go into a conference committee, and final language will have to be voted on again in both houses of Congress. it is important that all of our elected officials know where we stand!

5. For more background information and organizing resources, get in touch with and or all of these organizations:

United for a Fair Economy, 37 Temple Place, 2nd Floor, Boston, MA 02111 Telephone: 617-423-2148 x17 Fax: 617-423-0191 www.ufenet.org

Economic Policy Institute, 1660 L St., NW, Suite 1200, Washington, DC 20036 Telephone: 202-775-8810 epi@epinet.org

Union of Radical Political Economists (URPE)