political success of the Bush Administration’s tax cut strategy will depend on
how much they can deceive people as to who gets what. Most Americans, no matter
how much they hate paying taxes, do not believe that the richest people should
be first in line when it comes to getting tax relief.
estate tax (dubbed the "death tax" by Republicans in order to make it
sound sinister) is something that 98 percent of Americans will never have to
worry about. That’s because they do not leave enough assets to be taxed when
they die. A married couple can already exempt $1.35 million, and this rises to
$2 million by 2006. And anything that is left to a spouse is tax-free.
Bush has proposed to abolish the estate tax. The largest beneficiaries of this
generosity would be about 2400 estates that pay half of the tax. The lucky heirs
would save an average of about $3.4 million each.
it a "Head Start" program for the rich. But the Bush Administration
has a different spin: it’s all a valiant effort to spare family-owned businesses
and farms from being broken up on account of the "death tax."
check: 94 percent of farms, of any size, are not subject to estate taxes. Small
farms and businesses have higher exemptions and other special treatments, and
there are very few estates that are made up primarily of these assets. In 1998,
there were only 776 taxable estates- – less than 1.6 percent of the total– in
which the majority of the estate consisted of family-owned business assets. The
number was even smaller for farms.
tax-cutters have also proposed to fix the "marriage penalty," under
which some married couples pay more income taxes than they would if they had
filed individual returns. But here, too, Mr. Bush’s solution is skewed toward
upper-income households– some of which already benefit from a "marriage
bonus," as opposed to a penalty.
harshest effect of the marriage penalty falls on low-income households who
qualify for the federal Earned Income Tax Credit. We are talking couples who
earn less than $15,000 each, who can easily lose more than $3000 a year when
they get married. Mr. Bush’s tax overhaul will not get rid of this inequity.
detailed analysis of the whole $1.6 trillion tax cut, as done by the Citizens
for Tax Justice, shows that 43% of it would wind up in the hands of the richest
1% of taxpayers: those with an average income of $915,000 would get an average
tax cut of $46,000 a year. For the bottom 60% of taxpayers (income less than
$39,000), the average tax cut would be $227.
course, there is a case to be made for shifting the tax burden– in the other
direction. And fortunately, there is a sizeable source of tax revenue yet
untapped: financial and currency transactions. A very small tax on the buying
and selling of stocks, bonds and currency would barely be noticed by long-term
investors, but would discourage speculative trading. Such a tax would not only
raise a good deal of revenue, but would help get rid of some of the waste and
instability in our bloated financial markets.
case the projected budget surpluses turn out to be smaller than predicted, a
"speculation tax" would supply the necessary revenue for a tax cut to
those who most need and deserve it: the majority of Americans, who have not
shared in the economic growth of the last quarter-century.
Weisbrot is Co-director of the Center for Economic and Policy Research in
Washington and Co- author, With Dean Baker, of "Social Security: the
Phony Crisis" (University of Chicago, 2000)