Bush Tax Cuts Don't Add Up For Working Families

Announcing his mammoth tax cut plan in February, President George W. Bush showed off a giant check made out for $1,600 - the amount he claimed the "average" family with two children would save annually under his plan.

Don't bet on it say economists and union leaders.

Nearly 90 percent of taxpayers will save far less, and 27 percent of them won't get any relief at all, according to an analysis by Citizens for Tax Justice. But America's wealthiest citizens, the top 1 percent of taxpayers, would save more than $46,000 a year on average, once the plan is fully phased in.

"Very few of our working families are going to benefit under Mr. Bush's plan," CWA President Morton Bahr said. "We're certainly not opposed to tax cuts, but we can't support a scheme that makes the rich richer while jeopardizing our country's financial health."

Some economists estimate the plan will cost $2.6 trillion, a full trillion more than Bush claims. They say the complex and costly tax cut would do little to help the country's economy in the short run, and could seriously harm the economy in the long run by eating up the federal budget surplus.

Texas lawmakers say that's the situation they're facing now. Bush's tax cuts while governor - nearly $3 billion worth - have cost the state most of its surplus and now are forcing legislators to look at program cuts and tax hikes. "There's no doubt in my mind that George W. Bush's tax cuts have put us in the situation we're in right now," State Sen. Mario Gallegos, a Houston Democrat, told The Washington Post in February.

The AFL-CIO Executive Council recently condemned the federal plan as "morally wrong." At the council's winter meeting in Los Angeles in February, it proposed three tax-cut alternatives:

• A "prosperity dividend" of $400 a year for every man, woman and child in the country. The estimated cost for the first year is $110 billion. The dividend could be paid for 10 years, depending on the health of the budget surplus.
  
• A refundable income tax credit that exempts the first $5,700 in earnings from the employee portion of the payroll tax. Doing so would cost about $45 billion annually, with an average tax cut of $427.
  
• Increasing the tax credit per child to $1,000 and making it refundable, at a cost of about $44 billion a year. The average benefit to families with children would be $1,120.

The options are more affordable for the country and fairer to working families, AFL-CIO leaders said. "President Bush claims that the surplus can cover both his tax cut for the wealthy and meet the needs of America's working families. The numbers say otherwise," the council said in a joint statement.

Democratic Alternative
Democrats in Congress are countering Bush's plan with a proposal to split the projected $2.7 billion surplus three ways. About $900 billion would go to tax cuts over 10 years, with equal amounts set aside for Social Security/Medicare investments and spending for education, prescription drug benefits, the military and other programs. "Our plan is responsible, it's realistic and it's fair," said Sen. Tom Daschle (D-S.D.).

The first Republican to break ranks with the party to oppose the Bush plan was Sen. James Jeffords of Vermont. He told the Burlington Free Press that the cut gives too big a break to the rich at the expense of the working poor and middle class.

"There's not enough for low-income people who have no health insurance," he said, adding that Bush's projections seem "overly optimistic" and could lead to deficits, tax hikes or program cuts in the long run.

AFL-CIO President John Sweeney said the plan shows "utter disregard for the urgent priorities facing America's working families."

"For $375 billion, we could provide every Medicare beneficiary with prescription drug coverage," Sweeney said. "For $185 billion, we can provide every American child a place in a modern, wired classroom. For $315 billion, we can extend Medicaid coverage to 12 million adults and children."

Windfall for the Rich
Bahr said one part of Bush's plan that overwhelmingly favors the rich is the repeal of the estate tax, or so-called "death tax." It accounts for nearly 24 percent of the tax cut in Bush's plan - $55.3 billion.

But less than 2 percent of all estates in the country are subject to the tax. Any estate worth less than $1.35 million is exempt, a figure that will rise to $2 million by 2006.

"It's such a red herring," Bahr said. "Bush and the Republicans want middle-class families to believe that their children and grandchildren will be left with next to nothing after they pay estate taxes. In fact, they won't pay any at all. This is a windfall for the wealthy, period."

Some of the sharpest criticism of the plan comes from the Center on Budget and Policy Priorities, a nonprofit research group that has been widely praised for its objectivity by liberals and conservatives.

In analyzing the plan and evaluating U.S. Census data, the center estimates that 12.2 million low- and moderate-income families with children under age 18 - 31.5 percent of all families with children - stand to receive no tax cuts under the plan. Together, those families have 24.1 million children.

The situation is even worse for minority children. "While one-third of all children would not benefit from the Bush tax plan, more than half of all black and Hispanic children would not receive any assistance," according to the report. "An estimated 55 percent of African-American children and 56 percent of Hispanic children live in families that would receive nothing from the tax cut."

Conversely, the report says the Bush plan "showers tax cuts on high-income individuals far out of proportion to the taxes they pay."

The wealthiest 1 percent of Americans - based on a U.S. Treasury Department study - pays 20 percent of all federal taxes. But the Bush plan is designed to give them at least 36 percent of the tax cuts.

The report notes that a waitress who is a single mother earning $25,000 a year and paying at least $170 a month in child care would get no tax cut under the plan. Oddly, if her child-care costs were less - below $100 - she would qualify for a small cut, less than $200.

In contrast, the report says an attorney earning $250,000 a year would receive a cut of $3,100 to $8,400 a year, the amount depending on other changes in the tax code.

In addition to challenging Bush's tax plan, key Democrats in Congress are putting forth other legislation to help working families.

A bill to raise the minimum wage by $1.50 an hour was introduced in February by Sen. Edward Kennedy (D-Mass.), Sen. Barbara Mikulski (D-Md.) and House Minority Whip David Bonier (D-Mich.). The Fair Minimum Wage Act would raise the current $5.15 wage to $6.65 over two years.

"The real value of the minimum wage is now nearly three dollars below what it was in 1968," Kennedy said on the Senate floor. "To have the purchasing power it had in that year, the minimum wage would be $8.05 an hour today, not $5.15 an hour."

Another bill would give a tax credit to employers that provide workers with child care assistance.

The Child Care Infrastructure Act, proposed by Sens. Herb Kohl of Wisconsin and Bob Graham of Florida, would give companies a 25 percent credit toward the cost of childcare for workers. The credit could apply to building or subsidizing a day-care center on site, or reimbursing parents directly for child care, among other options.