Let’s Look at the Issues
Congressman Paul Ryan, who was Mitt Romney’s running mate in the 2012 U.S. presidential election, has released a proposed budget that would cut spending by more than $1 trillion over the next decade. Several conservative think tanks have also made proposals for reducing the budget deficit, and they have received widespread praise from the right wing media. Frankly, all of these plans make for very frightening reading.
Ryan’s proposal calls for cuts in virtually every government program that helps the poor, the sick and the elderly. Naturally, because it is a Republican proposal, there is nothing in it that calls for asking the wealthiest Americans to pay their fair share. That’s scary enough but the other proposals being floated by some conservative think tanks contain equally frightening ideas. Among them is the idea that workers’ benefits should be taxed.
According to published reports, the tax break that costs the federal government the most income — $264 billion last year — is the exclusion allowed to workers for their employer-provided health insurance. In other words, there is a growing suggestion that the value of your family health coverage plan should be counted as income and taxed and at the same rate.
This is not a new suggestion. It’s been proposed in the past by Republicans and assorted right wing fringe elements like tea party darlings, but Democrats have strongly — and successfully, so far — opposed the idea. That’s what led the Republicans and their Tea Party friends to try a different approach in recent years: attacking the wages and benefits of public employees. There is little doubt that soon the attacks will spread to private sector employees. Working people without health coverage who have to rely on Obamacare will be urged to demand that working people with health coverage pay taxes on the value of the benefit. Lost in the argument, of course, is the fact that many of these same workers over many years have given up larger wage increases for that health coverage, as well as other benefits such as pensions.
The conservative plan doesn’t stop there. The second largest tax deduction is for mortgage interest. To a wage-earning homeowner in the early stages of a 30-year mortgage, this deduction can be worth $3,000 or more a year. In fact, this tax deduction is often the difference between working families owning their own homes or having to rent. Yet, there is talk among Republicans about scrapping this deduction to help reduce the federal budget deficit.
The third biggest tax deduction — worth more than $50 billion last year — is for 401 (k) plan contributions. As so many members of our Union know through their participation in the 401 (k) plan, this program allows workers to make contributions toward their retirement with pretax income (note: members who want to begin participating in the program should read the front page article in this edition of Hotel Voice). It is no secret that this tax deduction was designed as an incentive for workers to save more money, and it shouldn’t surprise anyone to learn that the plan has worked. After all, 401 (k) plans, like home ownership, have long been advertised as “tax shelters” for the middle class. So, who can blame workers for taking advantage of these programs?
While there is a lot of talk about taking away these tax breaks from working families, we’re not hearing a lot about taking away tax breaks for the wealthiest Americans, are we?
Here’s an example: The extension of the Bush tax cuts provided an average of $146,000 in annual tax savings for each of the wealthiest one percent of Americans. Guess what? Those particular Bush tax cuts are still in place!
It’s true. While the number of Americans who live in poverty has increased each year since the Bush tax cuts were enacted, the rich have been making out like bandits, if you’ll excuse the expression. Along with cuts in their income taxes, the wealthiest Americans have also enjoyed cuts in estate taxes and capital gains taxes since 2000, when George W. Bush became president. In fact, the IRS reports that the average tax rate of the 400 wealthiest people in the U.S. decreased by almost 40 percent since 1992, while their average income increased over 500 percent during that same time period!
These proposals show us the difference between Republicans (and their Tea Party cohorts) and Democrats. The Republicans have been telling us since the first days of the administration of George W. Bush that tax cuts for the wealthy create jobs and bolster the economy. The truth, however, is that the Bush tax cuts for the wealthy created the longest and deepest recession in U.S. history, unemployment levels that hadn’t been seen since the Great Depression and the largest budget deficits ever.
In other words, we’ve already tried tax cuts for the rich. So instead of talking about cutting programs that help the poor, the sick and the elderly and instead of talking about taxing employer-provided health care and ending the tax deductions on mortgage interest and 401 (k) contributions, maybe it’s time to talk about having the wealthiest Americans start paying their fair share.
