10 years on, the Bush tax cuts are a disaster—and we’re contemplating more tax breaks for the wealthy. How can we stop the madness?
GOP candidate Tim Pawlenty observed the 10th anniversary of the Bush-era tax cuts by proposing $2 trillion in additional tax cuts, primarily for millionaires and global corporations.
Have we learned nothing?
A decade since their passage, its clear that the Bush tax were a $2.5 trillion mistake that put us on the road to fiscal instability.
At the time they were passed, Congressional budget analysts projected a $5.6 trillion surplus over these last ten years. But even after the rosy projections turned to red ink, the tax cut bonanza continued. As a result, Congress engaged in a “decade of magical tax cut thinking,” responding to the deep economic challenges of the last ten years with a one-point program: cut taxes for the wealthy and expand tax loopholes for global corporations.
In 2001, Bob McIntyre of the group Citizens for Tax Justice argued that the tax cuts were a bad idea—that they were overly tilted to benefit the rich—and would eventually lead to deficits. Last week, in the face of massive deficits and deep cuts to crucial programs, CTJ released a report projecting that another ten-year extension of the Bush tax cuts would cost $5.5 trillion.
“There are some in Congress who believe that the best way to deal with the struggling economy right now is to extend the tax cuts and see if they work the second time around,” said McIntyre. “They didn’t work the first time, and they aren’t going to work the second time.”
A report from the Economic Policy Institute points out that the Bush tax cuts cost over $2.5 trillion over the last decade. An estimated 38 percent of those tax cuts—almost $1 trillion—went to households in the richest 1 percent, those with incomes over $645,000. Tax cut beneficiaries include some of the highest paid CEOs in America.
Bleak Moment or Emerging Movement?
At first glance, the prospects for shifting this anti-tax environment appear bleak. GOP presidential candidates and Congressional leaders are beating the same drum: “We’re broke,” “Deficits Kill Jobs,” “Must Cut Taxes…”
Behind the headlines, however, public attitudes are shifting. A growing number of citizens are taking on the fundamental unfairness of the current tax system. They see how growing inequality is destroying the middle class and contributing to economic instability.
Historically, public attitudes about taxing the wealthy have been somewhat ambivalent. In the abstract, many U.S. voters are reflexively anti-government and anti-tax. But when it comes down to the concrete ways we use tax revenues, citizens want a responsive government that includes retirement security, environmental protection, healthy communities, and the wide range of public services that we enjoy.
As states and the federal government make deep budget cuts, the things people appreciate about government will start to deteriorate or go away: the bus will be late, the state park closed, the school art department gone, the police unavailable.
Though GOP congressional leaders talk austerity and imply that the only solution to budget deficits are spending cuts, a strong majority of people in the U.S. want to put raising taxes on the table.
Public opinion polls reveal that over 72 percent of the public favors increasing taxes on millionaires and closing tax loopholes before further budget cuts. And support for progressive taxes will only increase as the impact of budget cuts further degrades the quality of life, public services, and infrastructure in our localities.
Revelations that huge corporations and the wealthy are paying historically low tax rates are fueling this public attitude shift. Recent IRS data reveals that the richest 400 U.S. taxpayers have seen their effective tax rates fall to their lowest levels since prior to the 1930s Great Depression. The cover story in Business Week during April’s tax season was “The Billionaires Guide to Paying No Taxes.” And reports that General Electric pays no federal taxes—and that other companies including Verizon, Federal Express, Boeing and bail-out recipient Bank of America pay no or ridiculously low taxes—touch a deep nerve.
The grassroots US Uncut movement has emerged to draw attention to the powerful juxtaposition between budget cuts and corporate tax dodging. As a result, the public conversation is shifting. A year ago, the Tea Party narrative dominated April 2010 tax day. This year, however, the news on Tax Day focused on millionaire and corporate tax deadbeats.
The 10th anniversary of the Bush tax cuts focused new attention on the irresponsibility of further tax cuts. Grassroots groups convened actions and press events around the country to dramatize the link between the tax cuts and local budget cuts that worsen unemployment.
Activists are coalescing around a number of revenue proposals that could raise trillions of dollars over the next ten years. One initiative is the Fairness in Taxation Act, introduced by Illinois Congresswoman Jan Schakowsky. Her legislation would add additional tax rates for millionaires, generating $74 billion a year. In an op-ed in the Chicago Tribune, Rep. Schakowsky writes, “Middle-class and low-income families didn’t create these budget deficits or reap economic rewards over the last generation. So our nation’s plan to get our fiscal house in order should not sacrifice the vitality of our middle class and our commitments to address poverty.”
An organized group of 200 millionaire business leaders added their voices to the debate. The Patriotic Millionaires, organized by the Agenda Project and Wealth for the Common Good, released a video message to Congressional leaders to increase taxes on millionaires. “It is self-defeating to pursue these tax policies, and it is inconsistent with our values as Americans,” said Dennis Mehiel, Chairman of US Corrugated at a press conference on the tenth anniversary. “We need to throw out the Bush tax cuts in a hurry and begin the process of restoring some fiscal sanity to the country’s budget.”
Business leaders are also speaking up about troubling economic implications created when global corporations use offshore tax shelters to dodge taxes. Paul Egerman, founder of eScription, wrote in the Madison Capital Times, “it is myopic to require domestic enterprises to compete on an unlevel playing field against another company based not on product quality and services, but on accounting gymnastics.” A new business coalition is backing the Stop Tax Haven Abuse legislation that will be reintroduced later this June.
Opposition is also building against the idea, lobbied for by companies like Google, Apple, Pfizer, and Oracle, of a “tax holiday” for corporations that have shifted more than $1 trillion in profits to offshore tax havens—a move that would cost the U.S. Treasury $80 billion. Business for Shared Prosperity is circulating a business sign-on letter to Congress calling on them to “reject demands by U.S. multinationals for a tax holiday to “repatriate” the funds they shifted offshore to avoid paying taxes.” Last week, US Uncut began to challenge Apple Computer for its role in lobbying Congress for a “tax holiday” for corporations that have moved over $1 trillion in corporate profits to offshore tax havens.
The message of these emerging movements is getting louder: No more budget cuts until millionaires and corporate tax dodgers pay their fair share.
Originally Published at YES Magazine.
Chuck Collins directs the Program on Inequality at the Institute for Policy Studies. He is co-editor of Inequality.org and the author of Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth Home, and Committing to the Common Good.