Tax shame

December 09, 2005

Earlier this week, we noted the outright irresponsibility of the two competing tax-cut packages moving through the House and Senate. The Senate's $60 billion in cuts would include a one-year fix to the alternative minimum tax, largely benefiting the very well-off. The House yesterday finished approving almost $100 billion in cuts that would even more greatly benefit the rich, by extending tax breaks on interest and dividends. Meanwhile, Congress is cutting services for low-income families, and federal budget deficits continue to mount.

The reality is even worse.

Overlooked in most news accounts of these tax cuts are two more new tax cuts already set for 2006 - 97 percent of the benefit of which will go to the wealthiest 1 percent of Americans.

Yes, you read that right.

The two new tax cuts will reduce the taxes of the top 1 percent of all earners (with an average income of $1.2 million a year) by about $2,000 in 2006 and by a total of about $21,000 through 2010, according to Citizens for Tax Justice. For these top earners, this comes on top of receiving tax cuts averaging $100,000 a year since 2001.

Households in the top 95 percent to 99 percent of all earners would get the rest of the benefit from the tax cuts, averaging a bit more than $100 through 2010, the tax justice center figures.

Most everybody else - households with less than about $160,000 in annual income - would get virtually nothing from the cuts.

And the total cost of this to the Treasury over the next five years is projected at $30 billion to $35 billion.

It's hard to imagine tax cuts that would be more regressive and come at a worse time.

Congress passed the two new tax cuts as part of President Bush's 2001 tax-cut package. It added them and has not moved since to delay or repeal them. The president originally did not ask for them but has since sought to make permanent all of the 2001 cuts.

The two cuts call for the phase-out from 2006 to 2010 of existing limits imposed on the highest earners in benefiting from personal exemptions and itemized deductions.

It's no small irony that these limits on the ability of the well-off to use the exemptions and deductions were put in place in 1991 by President George H. W. Bush, the president's father, when fiscal responsibility trumped his no-new-taxes pledge.

We understand that his son's administration believes budget deficits don't much matter - and that, as a result, this president doesn't blink at the government running in the red each year to the tune of $300 billion or more.

We also understand that, in that context, $30 billion or so over five years is relative chump change.

But while Washington debates cuts in social programs and racks up trillions of dollars in debt that will be passed on to all our children, is there no end to this administration's willingness to help the very richest Americans lower their tax bills?

This goes far beyond fiscal recklessness - to pure political shame.

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