“Haven’t we already given money to rich people … Shouldn’t we be giving money to the middle?”
– President George W. Bush in November 2002, acknowledging to advisors that he knew his tax cuts were giveaways to the super-wealthy. (Source.)
If you were among the wealthiest 1-2% of Americans, it was the best of times. For the rest of us, it was “The Uh-Ohs,” a decade of conservative failure and its aftermath. From the government surplus in 2000 and the ill-advised and poorly planned wars that helped transform it into a deficit, to the stagnant economy and growing economic inequality we face today — none of it just happened and none of had to happen.
It was all consciously chosen — a direct consequence of conservative politics and policymaking — and about 99% of us are worse for it.
Uh-Oh! For 99% of us, it was a very taxing decade. From 2000 on conservatives preached the gospel of prosperity through tax cuts. Tax cuts for the very wealthy, that is. The idea was the tax cuts would put yet more money into the hands of the wealthiest Americans, who would then put that money back into the economy, and “spread the wealth” either by spending it on goods and services that create jobs or by investing it in ventures that would create jobs and benefit all Americans. The reality turned out to be something else.
- The Bush tax cuts mostly benefited the very wealthy. Tax rates for families earning more than $1 million a year dropped more than any other group, and stayed low while rates for middle-income families crept back up.
- According to the GAO, two thirds of corporations in the U.S. avoided paying taxes between 1998 and 2005, thus placing a greater tax burden on working families. Nonetheless, the Bush administration and conservatives campaigned to cut a corporate tax rate already among the lowest in the world.
- Thirteen banks among the 23 recipients of the $700 billion bailout also failed to pay more than $220 million in taxes.
- Congress passed up a chance to reign in corporate tax evasion via offshore tax shelters.
- Foreign banks helped wealthy Americans avoid taxes, via secret offshore accounts, costing the federal government up to $100 billion in annual revenues. The United Bank of Switzerland, where former Republican senator Phil Gramm — who authored much of the deregulation legislation blamed for the current meltdown — served as a senior vice president and advisor, admitted to having committed conspiracy and fraud and agreed to pay a $780 million fine.
- Not only did the Bush era tax cuts only benefit the wealthy, but the administration attempted to use policy to lay “tax traps” for seniors and middle-income Americans, thus increasing their tax burden.
Uh-Oh! We never got the “trickle down” of prosperity the tax cutters promised. Instead, we got a kind of Bizarro World “trickle up” economy, where billionaire Warren Buffet has a lower tax rate than his secretary. Of course it didn’t work. It couldn’t work and we’ve known for years it wouldn’t work. This long, slow grift actually began decades ago, but really began to pay off in the past ten years — when conservatives had control of both the White House and Congress, and could finally do a lot of things their way.
- The average tax rate of the wealthiest 1% fell to its lowest level in 18 years.
- Capital gains tax cuts lowered the tax rates of the top 400 tax filers, while their incomes soared. The top marginal tax rate now stands at 15%, less than half the top tax rate on wages and salaries. The result: the super-wealthy — who derive a large fraction of their income from investments rather than wages and salaries — now pay tax at very low rates.
- In the last economic expansion, from 2000 – 2007, two thirds of income growth went to the top 1%, whose income grew 10.1% annually, compared to 2.7% annual growth for the other 99% (i.e. the rest of us). (Source.)
- America’s most affluent 1% now pay just 6.4% of their incomes in state and local taxes. But they actually pay less — 5.2% — because they can deduct state and local taxes from their federal tax bill.
- Middle income families, who make up the middle fifth of the nation’s income distribution, pay 9.4% of their incomes in state and local taxes. (Source.)
- The poorest families, in the bottom 20%, pay 10.9% of their income in state and local taxes.(Source.)
But surely this all comes out in the wash. Right? Sure the wealthiest 1-2% enjoyed a bonanza of low taxes and higher incomes, but that had to trickle down to the rest of us in some form of fashion — either through jobs supported by increased spending at the top of the financial food chain, or jobs created by their investments here at home. Just like the banks we bailed out in order to save the economy were supposed to increase lending so the rest of could maintain a standard of living that includes living indoors, eating regularly, etc.
We help them, then they help us. That’s the way it’s supposed to work, right? Or, rather, that’s the way it was supposed to work.
So, what happened? As you might guess, that brings us to another “Uh-Oh.”