<i>Another</i> tax cut for the rich?

Marketplace Staff May 17, 2006

KAI RYSSDAL: Hey, you feeling a bit more flush today? You should. Washington’s $70 billion tax cut is law. The president signed it this morning at the White House. And Congress is set to begin work on another tax package soon. It includes $23 billion in tax cuts. All the while, lawmakers are considering spending bills, too. Just today the House was wrestling with a $2.8 trillion budget plan. Commentator Robert Reich wonders why we keep cutting taxes when we’re spending that kind of money.

ROBERT REICH: OK, so here we are six months before a mid-term election, with polls showing only about 20 percent of the American public approving the job Congress is doing. Meanwhile, the federal budget deficit is still out of control. We’ve got a war going on, with military spending over a half a trillion dollars a year. All sorts of public services are being slashed.

So what are we getting out of this Congress? A $70 billion tax cut.

Now, it would be one thing if this tax cut would go to middle-income workers now facing sky-high fuel prices and soaring health-insurance costs, and variable-rate mortgage payments heading through the roof. But this tax cut is not going to the middle class.

The non-partisan Urban Institute-Brookings Institution Tax Policy Center examined its provisions, including a two-year extension of capital gains and dividend tax cuts, and a one-year extension of relief from the Alternative Minimum Tax. It turns out a whopping 87 percent of the benefits of this tax bill will go to the 14 percent of households earning above $100,000 a year. Twenty-two percent of the benefits will go to the richest two-tenths of one percent of American households earning more than a million dollars a year.

Now, please, explain to me why we need another tax cut for high-income Americans. The previous capital gains and dividend tax cuts did not reap what their proponents promised. In fact, the rate of new investment in this recovery has trailed the rate of investment during the three previous recoveries. Productivity is up but almost nothing is trickling down to the middle class. The current median wage — around $35,000 this year — is where it was five years ago, adjusted for inflation. Top executives are raking in fortunes.

Members of the public who believe this bill is unfair and wasteful will get a chance next November to express their view.

KAI RYSSDAL: Robert Reich is a professor of public policy at the University of California Berkeley. He used to be the Secretary of Labor for President Clinton.

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