| First, the good news. The stimulus package included two tax cuts. The first cut reduces taxes 6.2% on earned income for couples earning less than $150,000 and for individuals earning less than $75,000. The second cut reduces taxes paid on Social Security, Veterans or Railroad retirement benefits. This is a onetime refund of $250.
Most Texas families clearly benefit from these tax cuts. They help factory and office workers, teachers and police officers as well as those who are trying to enjoy retirement. A few people don't benefit and are angry.
Republican politicians want different tax cuts. They want corporate tax cuts. They want capital gains tax cuts for Wall Street speculators. Republicans want to cut taxes for people earning more than $370,000 from 35% to 25%.
None of these facts are surprising. It's a story that goes back almost 30 years. Republicans started cutting taxes for corporations and top income earners under Ronald Reagan. He convinced Congress to cut the top marginal rate from 69 percent in 1980 to 28% in 1988. This approach then started to trickle down to the states.
The Center for Public Policies Priorities, a non-partisan research center based in Austin, provides an annual report called "Who pays Texas Taxes?" In 2009 Texans with incomes less than $27,000 have to pay 12 percent of their income to the state. The tax burden for Texans earning over $117,000 is just 4.9 percent. No wonder the average Texan is angry. After 30 years of "Republican tax cuts," the benefits have never trickled down to us.
Bill Clinton tried to fix this disparity. He raised the top marginal rate to 39 percent and gave middle class families several tax breaks. For example, he proposed the child tax credit to help families pay for day-to-day expenses, and, the Hope Scholarship for students entering college. Through a combination of tax cuts and increases Clinton created the first budget surplus since World War Two.
During the 2000 election, one of the key disagreements between George W. Bush and Al Gore was over what to do with the surplus. Bush wanted a tax cut for the top two percent of income earners, but Gore wanted the surplus put in a "lock box" and pay down the debt. Bush won and cut taxes at the top from 39 percent to 35%.
The results were exactly the same as under Reagan-the deficit ballooned. Never one to admit a mistake, Bush stayed the course even as two wars drained the treasury. The Republican Congress simply borrowed money from Communist China and Saudi Arabia to finance their magical budget strategy. Not only did we have huge deficits, but we also have the current economic collapse.
Now the Republicans are mad-again-because President Obama wants to return American to the real world. Like Bill Clinton, Obama cut taxes for average American and is now willing to let the top marginal rate return to 39 percent. People earning over $300,000 will have to pay more.
Yes, we should be angry. I am angry that we spent the last eight years pursuing a failed borrow and waste policy. I am hopeful, however, that President Obama and Congress learned from the mistakes of the last 30 years and will return America to proven financial strategies.
http://www.cppp.org |
