***Elect Hobie***
These Pages will make you laugh, cry, and Mad As Hell!
"I am a firm believer in the people.  If given the truth, they can be depended upon
to meet any national crisis. The great point is to bring them the real facts."  A. Lincoln

THE REAL FACTS ON GEORGE W'S TAX-CUT PLAN:
If You're Wealthy, This Tax-Cut's For YOU!

"Today I am sending to Congress my plan to provide relief to all income taxpayers, which I believe will help jump-start the American economy."  GW Bush  "The Republicans' tax bill is like one of those miracle weight-loss plans where one is suppose to lose 25 pounds in three days -- one pound on Day One, one pound on Day Two, and 23 pounds on Day Three.  Rep. Jim McDermott (D-Wash.)  Under Bush's plan tax-cuts wouldn't go into effect until 2002, with most benefits not realized until after 2005. The House made the first tax-cuts retroactive to January 1, 2001.  These tax-cuts would give all married couples a cut of $360 or $7 a week (with half that amount for single taxpayers).
"This is a well-planned-out tax relief package."  GW Bush
"The president's proposal would take people off the tax rolls, and the AMT would put them back on, in ways that would mystify them beyond belief."  Treasury Secretary Paul O'Neill The Alternative Minimum Tax ("AMT") was suppose to prevent wealthy taxpayers from avoiding taxes but it now primarily affects upper-middle income families with lots of deductions.  Although presently only 1.5% of taxpayers pay the Alternative Minimum Tax, the Congressional Joint Tax Committee estimates under Bush's plan one-third of all taxpayers would pay this tax -- and any fix could cost at least $300 billion. "We're lucky no one found out about this during the campaign."  Rep. Chuck Grassley, Chairman of the Senate Finance Committee.
"The goal is to get money in the pockets of the working people as quickly as we can."  GW Bush
"The president's winning argument is that the "average" family will get a tax cut of $1,600.  He does not say that over 80 percent of American families fall below that income average.  For a family of four earning $26,000 a year -- well above the $17,500 poverty level -- Bush's plan means a tax break of just $20.  That wouldn't do anything to ease the family's $2,600 Social Security payroll tax."  Los Angeles Times 2/12/01
"People with the smallest incomes will get the highest percentage of reductions.  And millions of additional American families will be removed from the income-tax rolls entirely."  GW Bush
"Overall, 12 million families with 24 million children -- one of every three children in the United States -- would receive no tax reduction."  R. Greenstein, testifying before the House Ways&Means Committee 3/2/01

The real question is why an "across the board tax-cut" doesn't help
more lower and middle class Americans?  And the answer is:
 IT DEPENDS ON WHAT YOUR DEFINITION OF "TAX" IS?

***CUTTING ONLY FEDERAL INCOME AND ESTATE TAXES IS NUTS!***

While income taxes have fallen for many Americans since Reagan pushed through the last big cut in marginal rates in 1981, the payroll tax burden for citizens -- and employers -- has soared. REAL FACT:  80% of working Americans pay more in payroll taxes than in income taxes.  Republicans -- and most Democrats -- have successfully buried any suggestion that payroll taxes should be cut -- or even included in measuring citizens' tax burdens -- by arguing that these taxes are tied to the taxpayer's own social security retirement benefits...
But, REAL FACT:  the 15+% burden on each person's wages (7.65% from the employee and 7.65% from the employer) goes to paying current retirees, and the surplus has gone to finance regular government operations.... that is the federal government borrows the surplus from itself to fund current governmental operations.  There is no Trust Fund, there is no Social Security "surplus"... only bookkeeping entries... REAL FACT:  Social Security benefits are not means tested... that is a millionaire gets the same amount as the person living on a declining fixed income. REAL FACT:  The Social Security tax (6.2% on both the employee and employer) applies to only the first $80,400.  As a result wages up to $80,400 are burdened with a 12+% tax... while wages above that amount is subject only to the Medicare portion.... so someone with wages of  $600,000 has effective social security tax rate of only 2% while the wages for most are subject to the full 12+%.... REAL FACT: State and local taxes, and especially sales and use taxes, inordinately burden lower and middle class workers.
***GIVING MOST BENEFITS TO THE VERY WEALTHY IS NUTS!***
When fully implemented Bush's plan to cut marginal rates and repeal the estate tax gives over 43% of the tax-cuts to the top 1% of taxpayers.... or $40-50,000 per family!  "Bush's people have said that is 'nonsense' but 3 officials refused to specify the benefit they believed would flow to the top 1% of taxpayers."  NYT 3/1/01
REAL FACT:  Lowering marginal rates means all taxpayers get the full advantage of the lower rate in every bracket... that is the first $15,000 of someone making $500,000 is taxed at the at the same rate -- and will benefit from any rate reduction -- as someone making $15,000....
REAL FACT:  Capital gains are taxed at a maximum 20% rate -- and for assets held 5 years the capital gains rate will drop to 18%...  Guess what, over 70% of all capital gains are realized by taxpayers with taxable incomes of $200,000 or more.
And REAL FACT:  In addition to low capital gains tax rates, wealthy taxpayers benefit far more from the mortgage interest deductions (including for second homes... and yes, yachts qualify); far more likely can contribute the full tax-favored amount to retirement and pensions; far more frequently have tax-favored investments like tax-free bonds; far more often can take business expenses (personal use on corporate jets is imputed at a first class rate); and far more often have high-priced lawyers, accountants, and brokers to cut their taxes and maximize returns.
In short, the "tax secret" is if all taxes are counted, lower and middle income taxpayers often have higher effective tax rates than the wealthy.
"Our tax system needs all sorts of reforms.  It is unnecessarily complicated, and sometimes at odds with sensible, self-reliant behavior.  Budget surpluses mean we can do a lot to reduce complexity, expand middle-class access to higher education, ease the impact of rising medical costs, and maintain a balance of public and private retirement-savings options.  But we can't afford to do all that if most of the surplus goes to cutting taxes for wealthy people who already escape taxes on a large portion of their income."  Ken Meissner, former legislative counsel to Joint Committee on Taxation  Cols. Dispatch 3/1/01
A single mother of two earning $22,000 gets nothing from Bush's bill.
The average compensation for chief executives among the nations largest public companies reached a record $11 million in 2000, a 16% increase over 1999, and more than double the average compensation in 1995.  R. Ableson, NYT 2/14/01
***BASING BIG CUTS ON LONG TERM ECONOMIC PROJECTIONS IS NUTS!***
Bush's tax cut is based on a 10 year (2002-2011) economic projection.
"FAITH-BASED FUNDING"  The caption of a Matt Davis cartoon on Bush's tax-cut plan and budget.
REAL FACT: "The same analysts who are now projecting massive surpluses were just a few years ago projecting deficits as far as the eye can see.  If they were so wrong then, how can we be sure they're right now?"  Rep. Pete DeFazio (D-Ore.)  REAL FACT: While the 10 year period (2002-2011) projects large surpluses, starting shortly after this 10 year period Social Security will begin running deficits, that will grow dramatically.  REAL FACT: While the CBO predicts 10 years of large surpluses, it also predicts the total national debt will be higher in 2011 ($6.7 trillion) than it is now ($5.6 trillion) because although the public debt (i.e. that owed to others) would be paid down, the self-owed debt (primarily Social Security) rises.
***RUSHING A TRILLION DOLLAR TAX-CUT IS NUTS!***
"Tax relief is right and tax relief is urgent.... We must act quickly."  GW Bush
REAL FACT: The headlong rush to hustle the tax cut through the House of Representatives has less to do with economic stimulus than the need to conceal the shaky assumptions that lie behind this budget.  The prudent thing to do, as many have suggested, is to enact a much smaller tax cut now, one that can be paid for out of existing surpluses, not projected or dreamed-of distant fortunes, and then watch what happens in this uncertain economy. " David Broder 3/4/01
"We will probably move these bills out of the House one bill at a time so we can talk about policy and we can talk about the benefits."  House Speaker Dennis Hastert
REAL FACT:  The House passed the first -- and most expensive part -- of Bush's Plan giving substantial cuts to wealthy taxpayers after 2 hours of debate.
***PASSING BIG TAX-CUTS BEFORE A BUDGET IS NUTS!***
"My plan pays down an unprecedented amount of our national debt, and then when money is still left over, my plan returns it to the people who earned it in the first place."  GW Bush
REAL FACT:  "Note the time sequence:  First, he said, we pay down the debt by saving the annual budget surpluses and then we return the leftover funds to the taxpayers.  No one except the Grinch could object to that.  But in the back of the budget book there's a table that tells a very different story.... And guess what?  Bush's own budget-writers say they expect to see only 1/4th of the supposed surplus materialize in the next 5 years.  Fully $4.2 trillion of the theoretical $5.6 trillion is projected to occur between 2006 (one year after the next presidential election) and 2001...."  David Broder 3/4/01
REAL FACT:  "By putting his a large tax cut ahead of his three big promises -- to fix Medicare, reform Social Security, and rebuild the military -- Bush is limiting the choices available in all these areas."  E. J. Dionne 2/21/01
"We should approach our nation's budget as any prudent family would, with a contingency fund for emergency or additional spending needs.... And so my budget sets aside almost a trillion dollars over 10 years for additional needs.  That is one trillion additional reasons you can feel comfortable supporting this budget."  GW Bush
REAL FACT: The $1 trillion contingency fund Bush highlighted in his address to Congress turns out to be $842 billion, and $526 of that is surplus Medicare taxes the House previously voted to use for debt reduction, leaving only $316 billion over the next 10 years for natural disasters, defense increases over Clinton's budget, antimissile shield, any other need.
***COUNTING ON BIG SPENDING CUTS IS NUTS!***
"A sure way to make sure this economy gets drug down is to overspend."  GW  NYT 3/1/01
REAL FACT:  GW Bush's Budget outline assumes $230 billion in unspecified cuts above the stated cuts to Agriculture, Transportation, Labor, Justice, Energy, Commerce, the EPA, and the Interior Departments, and other agencies.  Based on what has happened in the past it is reasonable to assume that some if not most of these cuts are politically unrealistic.
REAL FACT:  "Between 1996 and 2000 the domestic budget rose by a walloping 14 percent over inflation.  Over the last two years, as the surplus grew, Congress has exploded budget caps and engaged in an orgy of spending.  As a result, the 106th Congress, led by Dennis Hastert, Tom DeLay and Richard Armey, was the biggest-spending Congress in a quarter century, bringing back the days of Jimmy Carter and Tip O'Neill.... Will spending slow?  Over the last four decades Congress -- whether Democrat or Republican -- has shown itself incapable of restraint. Conservatives are fond of saying that God put Republicans on earth to cut taxes.  If so He erred.  Anyone can cut taxes.  It takes divine intervention to cut spending."  Fareed Zakaria Newsweek 3/12/01
In 1981 President Reagan promised that if the wealthiest Americans were given huge tax cuts the benefits would trickle down, deficits would disappear, and the economy would flourish.  Hugh deficits resulted that GW Bush's Treasury Secretary Paul O'Neill said "put America in a horrendous ditch" of deficits.  Republicans say the fault was with the Democratic Congress that failed to reduce spending, thus driving up the debt.  So this time if the tax cut passes and deficits result it will be the fault of Republican Congress, right?
"As for the 'starve the beast' argument that cutting taxes revenues will cut spending:  the Reagan years showed that the beast doesn't starve, it just borrows money."  Allan Sloan, Newsweek 2/19/01
***TAX CUTS THAT HURT SOCIAL SECURITY AND MEDICARE FUNDING ARE NUTS!***
"Seven years from now, the baby boom generation will begin to claim Social Security benefits.  Everyone in this chamber knows that Social Security is not prepared to fully fund their retirement...  Without reform, this country will one day awaken to a stark choice:  either a drastic rise in payroll taxes, or a radical cut in retirement benefits.  There is a better way.  I will form a presidential commission to reform Social Security."  GW Bush
REAL FACT:  "Bush's budget outline "rightly notes that Social Security's present path is 'unsustainable'; the revenues in prospect won't remotely cover the cost of the baby boomers' retirement.  But Bush would reduce those revenues.  For younger workers, the president wants to partly 'privatize' Social Security ...while preserving the existing system for older workers and those already retired.  The problem is how to finance both systems at once.  The budget outline suggests that at least some of the money for the new accounts would come from the existing Social Security surplus.  But that surplus is inadequate to cover prospective costs.  How, having deepened the hole, would he fill it?  Significant benefit cuts is the unspoken answer."  The Medicare pattern is similar.  The hospital part of the program, financed by the payroll tax, is in surplus.  That too will disappear when the boomers retire.  The budget outline rightly observes that in the long run Medicare will become a major drain on existing resources.  Yet once again, Bush proposes dipping into existing reserves rather than supplementing them."  Washington Post
REAL FACT:  "The reformers realize that today's system of relying on current workers to pay for the benefits of current retirees -- pay-as-you-go- -- will not remain viable as the baby boomers retire, because if retirement patterns stay as they are, there will be only two workers supporting every one retiree....  Years from now, if a different administration and Congress are trying to address Social Security with only a list of painful options, they will feel we missed an historic opportunity.  They will be especially resentful if we have given as much as half of the surpluses that were available to us to the top 5 percent of earners in our society, while most of the options remaining to them for savings will fall on average hard-working workers and retirees.  The problem with making a large tax cut our nation's top priority, rather than saving Social Security first, is that it may be far more difficult to save Social Security later."  Gene Sperling  NYT 3/21/01
***CALLING ANY CRITICISM OF BUSH'S PLAN "CLASS WARFARE" IS NUTS!***
"Could someone explain to me why I should pay 38 percent federal tax and some younger, less motivated person should pay 15 percent?  Why am I, in effect, paying for the shortcomings of people who may not want to work as hard?  David Walsh, Cols. Dispatch Letters 3/3/01
"'They pay most of the taxes, so they deserve the biggest percentage of tax relief.'  Supporters of this philosophy argue that higher rates for high-income taxpayers violates the principle that everyone is equal under the law.  This appealing simple idea, like many simple ideas, leads to bizarre consequences.  Suppose we knew the federal government would need $1 trillion next year.  Suppose further, that there are 200 million Americans.  If everyone kicks in $5,000 we would collect only what we need and we would treat every individual exactly the same.  Of course, some of those 200 million individuals are infants and toddlers, who are not likely to have $5,000 rattling around in their piggy banks.  Some are comatose cancer patients, and some are single parents taking fast-food orders at Wendy's or stocking shelves at Kmart, struggling to feed, clothe and shelter their families.  So for some to pay more while others pay less or nothing at all, actually makes sense.  Ability to pay is a reasonable basis for deciding who pays how much.  We honor the principle of equality by applying the same rate to everyone at the same income level."  Ken Meissner, former legislative counsel to Joint Committee on Taxation  Cols. Dispatch 3/1/01
"Describing the debate as class warfare does not advance a rational discussion.... Warfare occurs when people physically attack each other, not when they engage in rational discourse."  Robert Henson, NYT Letters 3/2/01
And while it may be difficult for some wealthy people to fathom, some people purposefully choose occupations that pay less, like teachers, nurses, police, the military, religious, and other charitable and -- yes even civic -- jobs.  REAL FACT:  On average those making modest amounts give a greater proportion of their income to charity than wealthier.
***AND FINALLY, REPEALING THE ESTATE TAX IS NUTS!***
"It is not fair to tax the same earnings twice -- once when you earn them, and again when you die, so we must repeal the death tax."  GW Bush  REAL FACT: Since Bush's plan continues the "step-up at death basis," a substantial part of all estate assets would avoid all tax.  REAL FACT: Presently there are no estate taxes on money left to a spouse or a charity; net assets (assets less debts and expenses) are taxed on amounts exceeding $675,000 (rising to $1 million in 2006) for singles and $1,350,000 (rising to $2 million in 2006) for married couples.  Farms and small business can exempt even more.  GW's tax plan calls for a total estate tax repeal, even for billionaires. Many legislators prefer reducing the top bracket rate and raising the exemption.  If the exemption was raised to $4 million, hardly anyone would pay.
"Because generations who don't have to work would blow their inheritance.  I believe that.  I'm not kidding you."  GW Bush on how great family fortunes would be broken up without an estate tax.   REAL FACT:  In other words, Bush agrees family fortunes should be broken up, but he prefers having  "spoiled rich kids redistribute income through sheer consumption and waste.  If they give Daddy's money to the Ferrari dealer, he'll re-circulate it through society.  This is an unusual economic and social analysis."  Jonathan Alter, Newsweek 1/17/00
Warren Buffett, the 4th richest American, said repealing the estate tax "would be a terrible mistake," the equivalent of "choosing the 2020 Olympic team by picking the eldest sons of the gold medal winners in the 2000 Olympics....  We have come closer to a true meritocracy than anywhere else around the world.  Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit."  Quoted in NYT 2/14/01
The debate over whether to repeal the estate tax is fundamentally a debate about what sort of America we want to leave to the generations ahead.  Nearly a century ago, reformers such as Theodore Roosevelt worried that the huge fortunes amassed during the Gilded Age would, if left untaxed, evolve into a dangerous permanent aristocracy.... Self-serving opponents of the estate tax are doing everything they can to confuse people.  They give it a bad name, the "death tax," and imply that most Americans commonly pay it.  In reality the estate tax is a tax on wealth, not death, and affects only the very wealthiest 2 percent of Americans.  Poverty, on the other hand, afflicts one out of six American children.  Repeal would hand the heirs of America's most affluent a $294 billion tax cut over the next decade....  The estate tax currently brings in revenue -- some $28 billion in 1999 -- equal to the entire federal expenditure for housing and urban development.  Federal revenues lost through estate tax repeal would have to be made up by increasing taxes on others or by cuts in Social Security, Medicare, environmental protection or other governmental programs important to our nation's well being.... It would be unconscionable to give the wealthy a massive tax break at  a time when crucial programs assisting children and seniors are on the chopping block....  For generations, the estate tax has provided he very wealthy with a powerful incentive for charitable giving.  The U.S. Treasury estimates that complete repeal would reduce contributions by up to $6 billion a year.  Taxable estates give charities more than twice the amount given by non-taxable estates.  In 1997 estates provided $14.3 billion to charities.  William H. Gates Sr.  Washington Post 2/16/01
If  these mega-millionaires think repealing the estate tax is unfair to average Americans, what should average Americans think?  E.J. Dionne 2/21/01

ON TO PAGE TWO OF THE REAL GUIDE TO GEORGE W'S TAX CUTS

Prepared  03/25/01; Original material and format only copyright 2001; other material copyright by holders;  see the Elect Hobie Homepage; Distribution encouraged with attribution.