GOP Candidates Double Down on Record Income Inequality
This week, the Congressional Budget Office (CBO) provided just the latest analysis confirming that U.S. income inequality is at record levels. But while the income gap is at largest in 80 years even as the total federal tax burden is at its smallest in 60, the 2012 Republican presidential field is proposing to make both much, much worse. As the numbers show, the GOP field's toxic mix of massive upper-class tax cuts, mountains of debt and draconian spending cuts would ensure the yawning chasm between the top 1% and everyone else grows wider still.
On the same day that Texas Governor Rick Perry announced his "Cut, Balance and Grow" program, the Washington Post reported "Republican candidates offer a diverse set of economic plans." Of course, a quick glance at their respective plans shows that diversity is in the eye of the beholder.
After all, Rick Perry, Mitt Romney, Newt Gingrich, Herman Cain, Jon Huntsman and Ron Paul would all slash the top income tax rate starting in 2013. Each would reduce corporate taxes, already down to their lowest percentage share of federal revenue since 1950, from 35% to as little as 9%. All would eliminate the estate tax, a $25 billion a year windfall to the richest families in America, only a quarter of one percent of whom now pay it. All but Romney would completely zero out the capital gains tax. (As the Washington Post recently explained the impact of the already historically low 15% capital gains tax rate, "Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.")
Regardless of which Republican emerges as the party's standard bearer in 2012, the result as John Harwood explained on CNBC, is that the richest Americans would get back "hundreds of thousands, maybe even millions of dollars" annually from the U.S. Treasury.
To which Rick Perry replied:
"But I don't care about that. What I care about is them having the dollars to invest in their companies."
Which is quite evident from Perry's plan. His optional 20% flat tax rate would allow the top income earners to pay Uncle Sam at a much lower rate than the already low 35% level they pay currently. And Perry would not merely eliminate the estate tax, he would zero out the capital gains tax as well. Reviewing an analysis from the Tax Policy Center, the New York Times' Catherine Rampell concluded:
The highest-income households (at the 99th percentile) in every structure of family analyzed always benefit from opting into the Perry plan.
Middle-income taxpayers and Uncle Sam are the big losers in Perry's gilded-class giveaway. Perry' own advisers estimate that his scheme would produce between $1.7 trillion and $4.7 trillion more debt than the CBO's baseline projection. (To deliver on his balanced budget pledge and his spending target of 18% of GDP, James Horney of the Center on Budget and Policy Priorities pointed out, would require "a dismantling of federal programs" and "draconian cuts in virtually every kind of spending.")
Still, Perry's plan pales in comparison to Herman Cain's 9-9-9 reward for the rich. As the Tax Policy Center documented, Cain's simple sound bite would slash taxes for millionaires by an average of $455,000 each, while raising taxes on virtually everyone else:
At the same time, those with incomes below $200,000 - 84 percent of taxpayers - would see their taxes increase under the Cain plan, according to the analysis.
As the Washington Post's Ezra Klein showed using the TPC data, while raising taxes on most Americans Cain's payday to the richest is literally off the charts. As Klein explained last week, "One problem with trying to graph the 9-9-9 plan is that the tax cuts for the rich are so large that it's hard to see what the policy is doing to the poor and the middle class. That's why I posted a table rather than a chart earlier."
While Mitt Romney has not yet drunk the flat tax Koolaid, his 59-point, 162-page proposal would nevertheless deliver another bonanza for the trust fund set. (As the New York Times reported last weekend, Romney may have already started sipping the flax tax elixir, reversing his old position that it is a "tax cut for fat cats" with his August declaration, "I love a flat tax.") Nonetheless, with its call to make the Bush tax cuts permanent, cut the top individual and corporate tax rate and end the estate tax, Romney's proposal would produce another payday for plutocrats while the Treasury hemorrhaged red ink. As ThinkProgress summed it up:
Romney's tax plan includes a $6.6 TRILLION giveaway to corporations and the wealthiest Americans. Meanwhile, Romney's Medicaid cuts are even more draconian than the ones in Paul Ryan plan. Both of their plans end also end Medicare, naturally.
And so it goes. Jon Huntsman "would introduce new taxes on veterans, seniors, the working poor, middle class Americans, students, and many others in order to give the top 0.1 percent an annual tax of nearly $500,000 each." Michele Bachmann has advocated "massive tax cut for corporations and the wealthy paid for in part by increasing taxes on the working poor."
Of course, Americans could be forgiven for having a queasy feeling that they've seen this movie before.
As the Center for American Progress reported, the Bush tax cuts delivered a third of their total benefits to the wealthiest 1% of Americans. And to be sure, their payday was staggering. The Center on Budget and Policy Priorities showed that millionaires on average pocketed almost $129,000 from the Bush tax cuts of 2001 and 2003. As a result, millionaires saw their after-tax incomes rise by 6.2%, while the gain for those earning between $40,000 and $50,000 was paltry 2.2%.
And as the New York Times uncovered in 2006, the 2003 Bush dividend and capital gains tax cuts offered almost nothing to taxpayers earning below $100,000 a year. Instead, those windfalls reduced taxes "on incomes of more than $10 million by an average of about $500,000." As the Times explained in a shocking chart: "The top 2 percent of taxpayers, those making more than $200,000, received more than 70% of the increased tax savings from those cuts in investment income."
It's no wonder that between 2001 and 2007- a period during which poverty was rising and average household income had fallen - the 400 richest taxpayers saw their incomes double to an average of $345 million even as their effective tax rate was virtually halved. As the Washington Post noted, "The 400 richest taxpayers in 2008 counted 60 percent of their income in the form of capital gains and 8 percent from salary and wages. The rest of the country reported 5 percent in capital gains and 72 percent in salary."
It's also no wonder that on the same day the CBO reported that "top earners doubled share of nation's income," a new CBS/New York Times poll found:
"Two-thirds of the public said that wealth should be distributed more evenly in the country. Seven in 10 Americans think the policies of Congressional Republicans favor the rich. Two-thirds object to tax cuts for corporations and a similar number prefer increasing income taxes on millionaires."
Americans have heard the Republican story before. And no matter how Mitt Romney, Herman Cain, Rick Perry or any other of the GOP White House hopefuls tell it, the ending is always the same:
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