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A World of Hurt: States, Cities, Schools Brace for New Round of Tax Cut Misery
School districts are cutting weeks of classes. Cities are laying off police officers, closing fire stations and squeezing public services to their bare bones. States are dropping needy seniors, disabled adults and children from Medicaid and insurance programs, shutting down hospitals for the mentally ill and releasing prisoners.
That's the situation now, and it's getting worse. Frantic state legislators, school board members, city and county officials and other elected leaders say vital programs and services will be devastated by the next round of federal tax cuts.
"Instead of helping us out, they're just digging us a deeper hole," said Oregon State Rep. Diane Rosenbaum, a shop steward in CWA Local 7901 in Portland.
In late May, the tax cut package had been negotiated down to $320 billion, about half of what President George W. Bush originally demanded. Yet economists say it's still far too big and grossly inequitable, and that the $20 billion Congress has pledged in aid to states is a drop in the bucket.
"We have the biggest revenue problem we've ever had in Oregon," Rosenbaum said. "We've gouged our school calendars. We've severely cut services for the elderly, the disabled and the poor. And as unemployment climbs so does the number of families who badly need the very services we can no longer provide. We have laid-off workers trying so desperately to make ends meet that they're digging through dumpsters for pop cans worth a nickel's deposit. How could any reasonable person think that hundreds of billions of dollars in tax cuts for the wealthy is the solution?"
New York, New Jersey, California and Oregon are among the states with the biggest looming budget shortfalls, but virtually every state is facing severe rollbacks that are affecting the quality of life for millions of people.
"It's a pretty big price to pay for a tax cut that will give back less than $100 to half of all taxpayers and put just $200 to $300 in the hands of the average person - while millionaires reap windfalls in the tens of thousands, and higher," CWA President Morton Bahr said.
Yet even those families who get a few hundred dollars back won't net anything, economists say. Cities, counties, school districts and states are mulling, or have already passed, higher local taxes and fees for services - charging children for taking the school bus, for instance - that will more than offset any federal tax rebate for the vast majority of people.
"It's a shell game," Bahr said. "You might save $200 on your federal tax bill, but your kids may need twice that much now to play school sports. Your property tax rate may well go up. Your share of employer-paid health care is almost certainly going up - especially if you're a public worker whose agency's budget is being squeezed by Bush economic policies."
That the rich will get richer under the Bush tax cut isn't in dispute. But tax cut critics say even the wealthy won't win in the long run. Anyone who cares about the quality of public schools, anyone who calls 911 for help, anyone who wants a dangerous intersection fixed or counts on public agencies to ensure the safety of tap water and other environmental standards - anyone and everyone will lose as local budgets shrivel.
"Passing these tax cuts will worsen the long-term budget outlook, adding to the nation's projected chronic deficits," says a statement signed by more than 450 economists, including many Nobel Prize winners. "This fiscal deterioration will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure, and basic research."
Bush and Republican leaders claim the tax cut would jumpstart the economy and be a cure-all for the nation's staggering 6 percent unemployment rate. Economists say while some new jobs would be created, history has proven that "trickle-down" policies help virtually no one but the rich. The 2001 tax cut is a case study: The economy has lost 2 million jobs and sunk deeper into a recession.
"You couldn't say reasonably that tax cuts won't have any stimulus effect at all," said economist Max Sawicky of the nonpartisan Economic Policy Institute. "The question is how efficient they are. By most economists' reasoning, they aren't very efficient."
Even the Republican-controlled Congressional Budget Office has concluded that whatever small stimulus may come from cutting taxes, it won't begin to equal the $2.7 trillion that Bush's tax cut and spending plans are expected to add to the federal deficit over the next decade.
Undeterred by his critics and the evidence, Bush spent early May making tax cut campaign trips pushing for as big a cut as Congress will swallow. At an appearance in Ohio, he poked fun at lawmakers who he said want only "little bitty tax relief."
His targets that day included moderate Republicans who oppose the size of his proposed cut. Coinciding with the trip, a pro-tax cut group took out ads assailing Ohio Sen. George Voinovich, a Republican who has said he won't back a cut higher than $350 billion, and Sen. Olympia Snowe (R-Me.), who is insisting on state aid packages in any tax cut plan. The ads attacked both senators' patriotism.
It was an eerily familiar tactic for Vermont Sen. Jim Jeffords, who switched from the Republican Party to Independent status in 2001. "Those who are expressing their reservations are being vilified for taking stands of conscience," Jeffords said in a May 3 response to Bush's weekly radio address. "When did standing on principle, speaking your conscience and representing your constituents become unacceptable in certain Republican circles?"
Jeffords said he regrets voting for Bush's 2001 tax cut, and won't make the same mistake again. "President Bush said that we could do it all, we could afford a tax cut, make investments in our national priorities, and still have money left over to pay down the debt. Time has proven those words wrong, and we have massive job losses and a soaring deficit to show for it."
Ironically, some of the strongest opponents of the Bush tax plan are among America's mega-rich. Billionaire Warren Buffett, the world's second-wealthiest man, says the tax cut "screams of injustice."
Buffett and such peers as Ted Turner and David Rockefeller have signed on to the Responsible Wealth campaign, launched in part by William Gates Sr., father of the Microsoft billionaire. The project is fighting efforts to repeal the estate tax, which last year generated $30 billion in revenues.
Anti-tax groups have spun the estate tax as deadly to family businesses, yet it applies to less than 2 percent of Americans. And even fewer people will be taxed in coming years as the threshold rises to estates worth more than $3.5 million for individuals and $7 million for couples.
"Wealthy pro-repeal family-owned companies such as Gallo Wine (worth $875 million) and Mars Candy ($27 billion) have thrived over generations with an estate tax on the books," Gates wrote in an opinion column. "But to boost their family wealth, they pitch self-serving myths about destroying family farms and 'Mom and Pop' businesses."
Federal tax cuts affect state and local budgets in two significant ways.
Grants and direct aid are part of the equation but "the bigger and more neglected side of this is on the tax side," Sawicky said, explaining how states with personal and corporate income taxes "piggy back" on the federal tax process. If federal taxable income goes down, so does the amount for calculating what's owed to state coffers.
"There's an automatic revenue loss to state governments, and that's significant," he said. "That happens through the income tax and also through estate and gift taxes."
Meanwhile, the federal government is reducing or abandoning its aid to state and local governments for education, justice, transportation and other programs. Yet it hasn't stopped issuing unfunded mandates, requiring states and school districts to administer costly programs without dollars to pay for them.
Some hard-line conservatives have gone so far as to say they don't care about state and local budget problems. The Heritage Foundation charges that states are awash in fiscal waste, and White House strategist Grover Norquist has said he hopes a state goes broke.
While people will always argue about what's wasteful spending and what's not, Sawicky said the idea that states are flush is "sheer lunacy."
"Their strategy is that you shrink government by cutting off its revenue source," he said. "You sell tax cuts with promises of great benefits and you discount the effects. They push for tax cuts without regard to the implications, or they deny the implications or fudge it off."
In New York City, Texas, New Jersey and other states and cities where CWA represents public employees, union members have taken a leading role in campaigns to save jobs and reverse the tax-cut fervor by fighting for tax hikes for high-income earners.
The New York City Council in early May approved an income tax surcharge for residents earning more than $150,000 a year, as well as a sales tax increase of one-eighth of a percentage point. The state legislature approved the finance package twice - overturning a veto by Gov. George Pataki.
Mayor Michael Bloomberg has already cut New York's workforce by 22,000 jobs over the past two years and, without additional revenue, thousands more are at risk, on top of scores of cuts in services for the city's most vulnerable residents.
Members of CWA Local 1180, which represents 7,000 city workers, turned out in force for a tax day rally April 15 and have taken out TV and newspaper ads to push for raising taxes on upper incomes.
The tax surcharge approved by the City Council "finally makes good on the oft-repeated claim that everyone in the city must 'share the pain' of the budget crisis," said Local 1180 President Arthur Cheliotes. "Until this agreement, the call for shared sacrifice had been no more than rhetoric, as the mayor looked only to squeeze concessions out of city workers, lay off thousands, and increase taxes that disproportionately hurt the working class."
While pleased overall with the tax package, the union doesn't support the sales tax increase, which labor leaders say is regressive and will hurt the city's poor the most.
In Texas, CWA members are fighting attempts to drastically reorganize the state's health and human services agencies. Doing so would cost thousands of jobs while reducing the number of people who are eligible for aid, and increasing the costs of co-payments and fees for those least able to afford them. To spare those agencies and others, members of the Texas State Employees Union, CWA Local 6186, are calling on the Legislature to boost revenue by $10 billion over the next two years.
"The combination of tax cuts pushed through by then-Gov. Bush in 1999 and falling sales tax revenues has created a crisis," TSEU Vice President Mike Gross said. "The governor and house leaders have flatly refused to consider new sources of revenue and have pushed an agenda of radical cuts in state services to bridge the gap."
In New Jersey, where CWA is in bargaining on behalf of 34,000 state workers, the union is part of a large coalition of labor and social service groups, as well as educators and elected leaders, who are waging the Fair Tax Campaign, which calls for a temporary income tax increase on higher earners. Some of those who would be subject to the tax are among those fighting for it, and say they disagree not only with the Bush tax cuts but those pushed through by former New Jersey Gov. Christie Whitman in the 1990s.
Self-described millionaire Herbert Greenberg told The Times newspaper in Trenton that he wouldn't suffer by having to pay a few thousand dollars more. Such cuts provide "big benefits to the rich and very little benefit to the middle class," he said, adding that the wealthy are more likely to put their tax cut savings in the bank or buy stock, while middle- and lower-income people spend it, thus creating true economic stimulus.
Don Rice, CWA legislative-political director in New Jersey, said there's a lot of momentum behind the fair tax fight, because so many people are being hurt by the consequences of tax cuts.
"It's wrong to cut Medicaid insurance for the poor. It's wrong to suggest that seniors on Medicaid and the disabled be asked to pay more for prescription drugs. It's wrong to under-fund schools. It's wrong to drive up property taxes. It's wrong to have state workers take a wage cut," Rice said. "Yet at the same time, millionaires are going to get back upwards of $90,000 when the next Bush tax cut kicks in. It's wrong, and we're not going to let it happen without a fight."
That's the situation now, and it's getting worse. Frantic state legislators, school board members, city and county officials and other elected leaders say vital programs and services will be devastated by the next round of federal tax cuts.
"Instead of helping us out, they're just digging us a deeper hole," said Oregon State Rep. Diane Rosenbaum, a shop steward in CWA Local 7901 in Portland.
In late May, the tax cut package had been negotiated down to $320 billion, about half of what President George W. Bush originally demanded. Yet economists say it's still far too big and grossly inequitable, and that the $20 billion Congress has pledged in aid to states is a drop in the bucket.
"We have the biggest revenue problem we've ever had in Oregon," Rosenbaum said. "We've gouged our school calendars. We've severely cut services for the elderly, the disabled and the poor. And as unemployment climbs so does the number of families who badly need the very services we can no longer provide. We have laid-off workers trying so desperately to make ends meet that they're digging through dumpsters for pop cans worth a nickel's deposit. How could any reasonable person think that hundreds of billions of dollars in tax cuts for the wealthy is the solution?"
New York, New Jersey, California and Oregon are among the states with the biggest looming budget shortfalls, but virtually every state is facing severe rollbacks that are affecting the quality of life for millions of people.
"It's a pretty big price to pay for a tax cut that will give back less than $100 to half of all taxpayers and put just $200 to $300 in the hands of the average person - while millionaires reap windfalls in the tens of thousands, and higher," CWA President Morton Bahr said.
Yet even those families who get a few hundred dollars back won't net anything, economists say. Cities, counties, school districts and states are mulling, or have already passed, higher local taxes and fees for services - charging children for taking the school bus, for instance - that will more than offset any federal tax rebate for the vast majority of people.
"It's a shell game," Bahr said. "You might save $200 on your federal tax bill, but your kids may need twice that much now to play school sports. Your property tax rate may well go up. Your share of employer-paid health care is almost certainly going up - especially if you're a public worker whose agency's budget is being squeezed by Bush economic policies."
That the rich will get richer under the Bush tax cut isn't in dispute. But tax cut critics say even the wealthy won't win in the long run. Anyone who cares about the quality of public schools, anyone who calls 911 for help, anyone who wants a dangerous intersection fixed or counts on public agencies to ensure the safety of tap water and other environmental standards - anyone and everyone will lose as local budgets shrivel.
"Passing these tax cuts will worsen the long-term budget outlook, adding to the nation's projected chronic deficits," says a statement signed by more than 450 economists, including many Nobel Prize winners. "This fiscal deterioration will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure, and basic research."
Bush and Republican leaders claim the tax cut would jumpstart the economy and be a cure-all for the nation's staggering 6 percent unemployment rate. Economists say while some new jobs would be created, history has proven that "trickle-down" policies help virtually no one but the rich. The 2001 tax cut is a case study: The economy has lost 2 million jobs and sunk deeper into a recession.
"You couldn't say reasonably that tax cuts won't have any stimulus effect at all," said economist Max Sawicky of the nonpartisan Economic Policy Institute. "The question is how efficient they are. By most economists' reasoning, they aren't very efficient."
Even the Republican-controlled Congressional Budget Office has concluded that whatever small stimulus may come from cutting taxes, it won't begin to equal the $2.7 trillion that Bush's tax cut and spending plans are expected to add to the federal deficit over the next decade.
Undeterred by his critics and the evidence, Bush spent early May making tax cut campaign trips pushing for as big a cut as Congress will swallow. At an appearance in Ohio, he poked fun at lawmakers who he said want only "little bitty tax relief."
His targets that day included moderate Republicans who oppose the size of his proposed cut. Coinciding with the trip, a pro-tax cut group took out ads assailing Ohio Sen. George Voinovich, a Republican who has said he won't back a cut higher than $350 billion, and Sen. Olympia Snowe (R-Me.), who is insisting on state aid packages in any tax cut plan. The ads attacked both senators' patriotism.
It was an eerily familiar tactic for Vermont Sen. Jim Jeffords, who switched from the Republican Party to Independent status in 2001. "Those who are expressing their reservations are being vilified for taking stands of conscience," Jeffords said in a May 3 response to Bush's weekly radio address. "When did standing on principle, speaking your conscience and representing your constituents become unacceptable in certain Republican circles?"
Jeffords said he regrets voting for Bush's 2001 tax cut, and won't make the same mistake again. "President Bush said that we could do it all, we could afford a tax cut, make investments in our national priorities, and still have money left over to pay down the debt. Time has proven those words wrong, and we have massive job losses and a soaring deficit to show for it."
Ironically, some of the strongest opponents of the Bush tax plan are among America's mega-rich. Billionaire Warren Buffett, the world's second-wealthiest man, says the tax cut "screams of injustice."
Buffett and such peers as Ted Turner and David Rockefeller have signed on to the Responsible Wealth campaign, launched in part by William Gates Sr., father of the Microsoft billionaire. The project is fighting efforts to repeal the estate tax, which last year generated $30 billion in revenues.
Anti-tax groups have spun the estate tax as deadly to family businesses, yet it applies to less than 2 percent of Americans. And even fewer people will be taxed in coming years as the threshold rises to estates worth more than $3.5 million for individuals and $7 million for couples.
"Wealthy pro-repeal family-owned companies such as Gallo Wine (worth $875 million) and Mars Candy ($27 billion) have thrived over generations with an estate tax on the books," Gates wrote in an opinion column. "But to boost their family wealth, they pitch self-serving myths about destroying family farms and 'Mom and Pop' businesses."
Federal tax cuts affect state and local budgets in two significant ways.
Grants and direct aid are part of the equation but "the bigger and more neglected side of this is on the tax side," Sawicky said, explaining how states with personal and corporate income taxes "piggy back" on the federal tax process. If federal taxable income goes down, so does the amount for calculating what's owed to state coffers.
"There's an automatic revenue loss to state governments, and that's significant," he said. "That happens through the income tax and also through estate and gift taxes."
Meanwhile, the federal government is reducing or abandoning its aid to state and local governments for education, justice, transportation and other programs. Yet it hasn't stopped issuing unfunded mandates, requiring states and school districts to administer costly programs without dollars to pay for them.
Some hard-line conservatives have gone so far as to say they don't care about state and local budget problems. The Heritage Foundation charges that states are awash in fiscal waste, and White House strategist Grover Norquist has said he hopes a state goes broke.
While people will always argue about what's wasteful spending and what's not, Sawicky said the idea that states are flush is "sheer lunacy."
"Their strategy is that you shrink government by cutting off its revenue source," he said. "You sell tax cuts with promises of great benefits and you discount the effects. They push for tax cuts without regard to the implications, or they deny the implications or fudge it off."
In New York City, Texas, New Jersey and other states and cities where CWA represents public employees, union members have taken a leading role in campaigns to save jobs and reverse the tax-cut fervor by fighting for tax hikes for high-income earners.
The New York City Council in early May approved an income tax surcharge for residents earning more than $150,000 a year, as well as a sales tax increase of one-eighth of a percentage point. The state legislature approved the finance package twice - overturning a veto by Gov. George Pataki.
Mayor Michael Bloomberg has already cut New York's workforce by 22,000 jobs over the past two years and, without additional revenue, thousands more are at risk, on top of scores of cuts in services for the city's most vulnerable residents.
Members of CWA Local 1180, which represents 7,000 city workers, turned out in force for a tax day rally April 15 and have taken out TV and newspaper ads to push for raising taxes on upper incomes.
The tax surcharge approved by the City Council "finally makes good on the oft-repeated claim that everyone in the city must 'share the pain' of the budget crisis," said Local 1180 President Arthur Cheliotes. "Until this agreement, the call for shared sacrifice had been no more than rhetoric, as the mayor looked only to squeeze concessions out of city workers, lay off thousands, and increase taxes that disproportionately hurt the working class."
While pleased overall with the tax package, the union doesn't support the sales tax increase, which labor leaders say is regressive and will hurt the city's poor the most.
In Texas, CWA members are fighting attempts to drastically reorganize the state's health and human services agencies. Doing so would cost thousands of jobs while reducing the number of people who are eligible for aid, and increasing the costs of co-payments and fees for those least able to afford them. To spare those agencies and others, members of the Texas State Employees Union, CWA Local 6186, are calling on the Legislature to boost revenue by $10 billion over the next two years.
"The combination of tax cuts pushed through by then-Gov. Bush in 1999 and falling sales tax revenues has created a crisis," TSEU Vice President Mike Gross said. "The governor and house leaders have flatly refused to consider new sources of revenue and have pushed an agenda of radical cuts in state services to bridge the gap."
In New Jersey, where CWA is in bargaining on behalf of 34,000 state workers, the union is part of a large coalition of labor and social service groups, as well as educators and elected leaders, who are waging the Fair Tax Campaign, which calls for a temporary income tax increase on higher earners. Some of those who would be subject to the tax are among those fighting for it, and say they disagree not only with the Bush tax cuts but those pushed through by former New Jersey Gov. Christie Whitman in the 1990s.
Self-described millionaire Herbert Greenberg told The Times newspaper in Trenton that he wouldn't suffer by having to pay a few thousand dollars more. Such cuts provide "big benefits to the rich and very little benefit to the middle class," he said, adding that the wealthy are more likely to put their tax cut savings in the bank or buy stock, while middle- and lower-income people spend it, thus creating true economic stimulus.
Don Rice, CWA legislative-political director in New Jersey, said there's a lot of momentum behind the fair tax fight, because so many people are being hurt by the consequences of tax cuts.
"It's wrong to cut Medicaid insurance for the poor. It's wrong to suggest that seniors on Medicaid and the disabled be asked to pay more for prescription drugs. It's wrong to under-fund schools. It's wrong to drive up property taxes. It's wrong to have state workers take a wage cut," Rice said. "Yet at the same time, millionaires are going to get back upwards of $90,000 when the next Bush tax cut kicks in. It's wrong, and we're not going to let it happen without a fight."