cc:1989
theres some numbers in here since you really dig that sort of thing.
david cay johnston calls the US tax system niagra falls in reverse; from the poor to the rich.
http://www.kropfpolisci.com/tax.policy.johnston2.pdf
But even the 1997 tax cuts for the rich were not enough for them or their friends in
Congress. Under the first round of tax cuts sponsored by President Bush in 2001, the share of
their income going to taxes would slip further, to about 21 percent of their incomes. Had the
third round of Bush tax cuts in 2003 been in effect in the year 2000, the 400 richest Americans
would have saved an average of $8.3 million each. They would have paid 17.5 cents on the
dollar of income in 2000, not much more than the average paid by all Americans. Six years of
tax cut bills, all promoted as promoting the interests of the middle class, were in fact primarily a boon
to the super rich.
It hasn't always been this way. After the Sixteenth Amendment was adopted in 1913, the
federal government in short order enacted a regime to tax incomes, gifts and estates. These
taxes came with the explicit promise that the basic means of sustaining life would not be taxed.
The original tax regime applied only to the economic elite, to what were then called "surplus"
incomes. Back then income from capital was taxed more heavily than income from wages in the
belief that it was morally offensive to take more from money earned by the sweat of one's brow
than from money obtained by clipping coupons.
To pay for World War I, in which young men were conscripted, it was said that the
"conscription of wealth" was also necessary and fair. One ofthe leading economists of the day,
Edwin R. A. Seligman, a proponent of taxes based on ability to pay, said that "patriotism can
often be translated into dollars and cents —in fact, the material side of patriotism is often quite as important as the spiritual side." The estate tax and the gift tax, which apply to wealth, were
expanded and the income tax came to apply to a larger, but still minute, percentage of
Americans.
Just a third of a century after the war to end all wars, the costs of a second global conflict
ended the promise that only surplus incomes would be taxed. While only a minority of people
was taxed during World War II, the politicians got a taste of the huge revenues they could
control by expanding the tax base. After the war, primarily at the behest of Democrats, but with support from many Republicans, the income tax was steadily expanded until it applied to most Americans
and to most of what they earned. Much of this money was poured into the military and the Korean conflict, but funds were
also used to expand education, build highways and finance technological breakthroughs that improved lives. Throughout the fifties and sixties,
Congress also let inflation erode the value of exemptions for taxpayers and their children,
causing them to pay a growing share of their incomes in taxes.
By the late seventies, this system was becoming untenable as sales of tax shelters
flourished. Once the province of the rich, tax shelters were being mass marketed to doctors,
dentists and even cops and working journalists. Many of these shelters did nothing to grow the
economy, but were instead a drag on it, and not a few were pure scams. Inflation, combined
with an end to real growth in wages beginning in 1973, created a phenomenon known as
"bracket creep" that moved people into higher tax brackets even if their real incomes were
unchanged. Government through this era kept growing, especially military spending to
prosecute the war in Vietnam and state and local spending to pay for schools, professionalize police departments and provide welfare for those unable or unwilling to compete in the job market.
Now, less than a century after its adoption, the tax system is being turned on its head. Since
at least 1983 it has been the explicit, but unstated, policy in Washington to let the richest
Americans pay a smaller portion of their incomes in taxes and to defer more of their taxes,
which amounts to a stealth tax cut, while collecting more in taxes from those in the middle class.
The Democrats embraced this in 1983, when they controlled Congress. They voted to raise
Social Security taxes, changing it from a pay-as-you-go system to one in which people were
required to pay 50 percent more than the retirement and disability program's immediate costs, tobuild a trust
fund to pay benefits more than three decades into the future. Those taxes were not,however, locked away but in
stead were spent to help finance tax cuts for the super rich thatbegan in 1981.
Under the Republicans, beginning in 1997, this policy of taxing the poor and the middle
class to finance tax cuts for the super rich was expanded through changes in the income tax
system. The changes were subtle and hardly reported in the news media, but they were also substantial. Under the first round of Bush tax cuts enacted in 2001 the middle class and the
upper middle class will subsidize huge tax cuts for the top 1 percent and, especially the top one
tenth of 1 percent, the 130,000 richest taxpayers.
For a nation that has debated for years whether the tax rate cuts be gun by President Reagan in 1981 are "trickle-
down economics," it may be startling to read that the reality of these
changes has been just the reverse. The tax system is causing the benefits of American society
to flow up and pool at the top. As we shall see in the chapters ahead, the official government
statistics show just that. And the critics who have decried the growing concentration of wealth
and power at the top have been wrong—because they have seriously understated the transformation now taking place.
The tax system is becoming a tool to turn the American dream of prosperity and reward for
hard work into an impossible goal for tens of millions of Americans and into a nightmare for
many others. Our tax system is being used to create a nation with fewer stable jobs and less
secure retirement income. The tax system is being used by the rich, through their allies in
Congress, to shift risks off themselves and onto everyone else. And perhaps worst of all, our tax
system now forces most Americans to subsidize the lifestyles of the very rich, who enjoy the
benefits of our democracy without paying their fair share of its price.
