May-June 2001

The Bush Tax Cut

Who Profits? Who Pays?

President Bush’s proposed $1.6 trillion tax cut is the hottest political issue of the year. According to public opinion polls, Americans rank a large tax cut as one of the last things they want to do with the federal surplus. But Congressional Republicans believe they’ll prevail. The debate will be intense and the Senate vote, scheduled for early July, promises to be close.

The sheer size of President Bush's tax cut is staggering. Critics charge that it jeopardizes our nation’s ability to meet domestic and foreign responsibilities, threatens to overwhelm the federal budget, may push the country into deficit, and squeezes vital health, education, and environmental programs.

The one group that wholeheartedly embraces the Bush plan is the “haves and the have-mores,” as Mr. Bush referred to his supporters. They will receive the lion’s share of its benefits. Under the Bush plan:

• 45% of the tax cut would go to the wealthiest 1% of Americans, even though they pay only 20% of federal taxes. For this group, the average annual windfall would amount to $54,480 – or $150 per day.
  
  
• Middle-class Americans – whose annual income falls between $27,000 and $44,000 – would receive an average tax cut of $509 per year –just $1.39 per day.
  
  
• No benefits at all would go to some 27% of taxpayers – 34.4 million families. More than half of all African-American and Hispanic families with children would receive nothing under the plan.
  
  
• The wealthiest one percent’s after tax income would increase by 6.2%, the middle-class’ by 1.9%, and for the twenty percent at the bottom of America’s economic stratum, a paltry 0.6% increase.

Elimination of the estate tax is a cornerstone of the Bush plan. Despite the rewards its repeal would reap them, hundreds of America’s wealthiest have rallied to preserve the estate tax – including Bill Gates, Sr. and former Fed Chairman Paul Volcker. Critics claim repealing the tax would further concentrate economic and political power in the richest – and smallest – sector of the American economy:

• 98% of Americans who die pass their estate on to their heirs completely tax-free.
  
  
• Only 3 of every 10,000 people who die leave a taxable estate in which either a family farm or business forms a majority of the estate.
  
  
• Repealing the tax would reduce charitable giving by $5 to $6 billion a year.
  
  
• Over the next 20 years the estate tax repeal would cost the country a stunning $1.2 trillion.

Proponents say a tax cut will jump-start the economy, but skeptics say its effects would be too slow to head off a recession. The later – and larger –cuts would take place even if the country could no longer afford them. Is the Bush tax cut is too big or just right?

Would the Bush plan put money in everyone’s pockets or squander the surplus on a tax giveaway for the rich? What alternatives would provide balanced tax relief while addressing the public’s expressed priorities?

Between May and June 2001 MMP offered the nation’s top economists and tax experts to help people understand the Bush tax plan for themselves and the country as a whole. In all, we scheduled some 13 authorities on 37 radio interviews in 14 states. Of these, 6 were regionally, nationally or globally syndicated.

Guest Speakers by Topic:

Carole Collins, Former National Coordinator, Jubilee 2000

Amy Dean, Executive Officer, Silicon Valley South Bay AFL-CIO Labor Council, Executive Director, Working Partnerships, USA

Joel Friedman, Senior Fellow, Center on Budget and Policy Priorities

Sara Gould, Executive Officer, Ms. Foundation for Women

Julianne Malveaux, President and CEO, Last Word Productions, Syndicated Columnist, USA Today, San Francisco Sun Reporter

William McNary, President, US Action, Co-Director, Board Member, Citizen Action/Illinois, Health and Medicine Policy Research Group

John Miller, Economics Professor, Wheaton College, Contributing Editor, Dollars & Sense magazine

Holly Sklar, Writer and Lecturer

Dalton Conley, Associate Professor of Sociology, New York University, Director, Center for Advanced Social Science Research, New York University

Neil Harl, Professor of Agriculture and Economics , Iowa State University

Chuck Hassebrook, Program Director , Center for Rural Affairs

Jonathan Rowe, Contributing Editor, Washington Monthly

Lois Canright, Northwest Organizer, United for a Fair Economy

Barry Hermanson, Owner and Operator, Hermanson’s Employment Services

Mike Lapham, Co-Director, United for a Fair Economy, Project Director, Responsible Wealth

Judy Wicks, President and Founder, White Dog Cafe, Board Chair, Social Venture Network

Rick Cohen, President, National Committee on Responsive Philanthropy

Joan Garner, Executive Director, 12-state Southern Partners Fund

Ellen Gurzinsky, Executive Director, Funding Exchange

Chuck Collins, Co-Founder and Program Director, United for a Fair Economy

William Gates, Director, Bill and Melinda Gates Foundation

Bob Reinhold, Treasurer and Attorney, Americans for Democratic Action, St. Louis

Christopher St. John, Executive Director, Maine Center for Economic Policy

Jeff Thompson, Policy Analyst and Economist, OR center on public policy