Beware of "Tax Cuts"

Mention April 15th and most Americans grimace. Disliking taxes is not a new phenomenon. But if the tax burden is equitable and the services that those tax revenues support make our lives better, most Americans understand that taxes are necessary.

Today, resistance to taxes may be growing because wages for most Americans are flat or falling. A tax cut, no matter how small, may be the only raise many families can hope to get. It is not surprising then that many voters are quick to support politicians who promise tax cuts.

Don't be fooled. As with everything else, the truth is in the fine print. Every tax plan has its winners and its losers, and the tax cuts being advanced by Newt Gingrich, Bob Dole, and their Republican cronies are real losers for American workers and their families.

The Wage Story: Profits Up, Wages Down

Here are the key facts on wages:

• The rich are getting richer. Between 1989 and 1994, 80 percent of American workers lost income while 20 percent gained, with most of that increase going to the top five percent of wage earners. Income is more unequally distributed today than at any time since the Great Depression.
• Family income is falling. In 1993, median family income adjusted for inflation was $2,737 less than in 1989, falling from $39,696 to $36,959—a 6.9 percent decline. Moreover, that drop occurred when the number of families with two or more people in the workforce, some with two jobs, increased.
• Workers are doing more for less. Earnings last year were basically flat—gaining only 2.7 percent, or barely keeping up with inflation. This was the smallest wage gain since the Department of Labor created the employment cost index 15 years ago. During the same period, worker productivity increased three times more than their pay hikes.
• A BA degree is no longer good for first-class accommodations. Wage losers include men with a four-year college education, as well as women with some college but less than four years.
• This is a boom time for the wealthy. The stock market is at an all-time high and corporations are racking up record profits.
• The boss is not sharing the gains with the workers. In 1995, CEOs earned 135 times as much in wages and compensation as did the average worker. This is up from 35 times as much in 1974. At America's top ten corporations, the CEO now makes 225 times as much.
• In 1995, companies continued to lay off workers in record numbers. On the same day that the CEO of AT&T—who earns $5 million a year—decided to lay off 40,000 employees, the value of his stock portfolio went up by $5 million.

The Tax Story: Dollars for the Rich; Pennies for Working Families

President Clinton vetoed the Budget Bill passed by the Republican-controlled House and Senate which contained $245 billion in tax cuts over seven years. Clinton vetoed it on the same grounds that President Franklin Roosevelt vetoed a 1944 tax bill. Roosevelt said, "It is not a tax bill, but a tax relief bill—providing relief not for the needy, but for the greedy."

Here are the key facts of the Republican congressional leadership's tax plan:

• Sixty-four percent of families would pay the same or more in federal taxes under the plan. Seventy million families would see no tax change at all.
• Some 9.2 million families would face tax increases, averaging $258 a year per family, mostly because of cutbacks in the Earned Income Tax Credit for low and moderate income working families.
• Another tax cut for the rich. Changes in tax policies from 1977 to 1989 gave an average tax break of $52,621 to the richest families in 1989. These same folks would be the big winners in 1996, too. The average tax cut for the wealthiest one percent of all families—with average 1996 incomes of $606,000—would be $10,475.
• By contrast, the Gingrich/Dole plan would give an average tax cut for middle income families of only $114.
• The wealthiest five percent of all families would receive 44 percent of the total tax cut. In contrast, the bottom 80 percent would get only 28 percent of the net reduction.

AFSCME Members Socked Twice

The Republican congressional leadership's tax plan would sock it to AFSCME members twice. After leaving most AFSCME families paying the same or more in federal taxes, it would deprive states of much needed federal dollars—which could cost many AFSCME members their jobs.

The Republican Congress is asking states to take on traditionally federal functions. At the same time, they're reducing the funding to help states meet these responsibilities—replacing federal funding with block grants. Meanwhile, federal capital gains tax cuts—which go mostly to the wealthy—could cost the states an additional $26 billion in lost revenues over the next ten years, because state tax collections are linked to federal taxable income.

No matter how you slice it, Newt Gingrich and Bob Dole's tax cuts favor the rich and will do nothing to make up for painful declines in wages for the vast majority of workers. Let your Senators and Representative know that these tax cuts go too far. Phone them at (202) 224-3121 or toll-free (outside D.C.) at (800) 972-3524, or write to their offices. To your Senators, address your letter: U.S. Senate, Washington DC 20510 and to your Representative: U.S. House of Representatives, Washington DC 20515.