(WOMENSENEWS)–By tilting his tax cut proposal toward already affluent taxpayers and away from lower income populations, President Bush’s proposed $1.6 trillion package appears likely to put the economically disadvantaged at even greater disadvantage–notably women, children, the elderly and people of color, analyses show.
The bountiful Bush tax cut proposal, announced to the Republican-controlled House of Representatives Tuesday night, would bestow 40 percent of the tax relief to the top 1 percent of taxpayers. The bottom 40 percent of the population would receive 4 percent of the proposed tax cuts. Those too poor to pay income taxes would get no help at all.
The Bush 10-year plan gives back virtually nothing to working but currently poor families, and the relatively minor benefits on the low end of the income spectrum appear likely to have disproportionately negative effects on the most vulnerable segments of the population.
53 Percent of Black and Hispanic Families Would Get No Tax Relief
- More than half of women workers are in low-paying sales, clerical and care-giving jobs, leaving them in the income brackets least likely to enjoy the proposed tax cuts.
- The Center on Budget and Policy Priorities, a progressive Washington economics think thank, calculates that the Bush plan would leave out 12 million American families that include 24 million children.
- The Children’s Defense Fund estimates that Bush’s version of the child tax credit would cut out 16 million children because it is non-refundable to low-income and currently poor families.
- Analysis by the Center on Budget and Policy Priorities finds that 53 percent of black and Hispanic families would receive no tax reduction from the Bush plan. Black and Hispanic children are more than twice as likely to get nothing from the Bush plan as are white, non-Hispanic children.
- If the estate tax is abolished, as Bush proposes, wealthy taxpayers would have less incentive to make substantial charitable and other donations in order to reduce their tax liability. Those donations have helped organizations that help the disadvantaged and work in fields such as violence prevention, reproductive rights, economic justice and welfare reform–areas that are important to women.
- Small businesses, many of them owned by women, will pay for the President’s tax cuts through higher loan costs and new taxes disguised as fees, while critical programs spurring minority-owned businesses will be eliminated, said Rep. Nydia M. Velazquez, D-N.Y., on Wednesday.
Velasquez is the leader of the House Small Business Committee. The budget cuts funds for the Small Business Administration by 40 percent, slashing it from $900 million to $540 million. It restricts access to capital–already difficult for women–by imposing new fees, an additional $2,800, for a popular type of loan.
|Income Group||ITEP Model
(Citizens for Tax Justice)
|ITEP Model with the Treasury Estimates on Who Pays the Estate Tax|
Bush sent his budget to Congress on Wednesday. His plan and budget rely on a projected surplus over 10 years of $5.6 trillion, which some experts say may not materialize because of the decided economic slowdown. Critics say it will cost closer to $2 trillion than the $1.6 trillion officially projected and note that it is back-loaded, that is, most projected benefits accrue in the later years.
In his budget message, Bush emphasized his increased spending on education and a goal of improving early reading. He seeks an 11.5 percent increase in funding for the Department of Education. He also budgets for vouchers for private education and a program to help low-income fathers obtain training and jobs.
Cutting Income Taxes, Ending Estate Tax, Upping Child Credit, Charity Deductions
According to experts familiar with the Bush plan:
- Cutting income taxes and adjusting the number of brackets would make the highest bracket 33 percent instead of 39.6 percent. The lowest bracket would fall from 15 percent to 10 percent. Married couples will receive some benefits. There is some downward adjustment in taxes for some married couples.
- Phasing out the estate tax, which now applies only to very large estates, is likely to benefit more men than women. IRS data for 1995 show that most of those who would be affected by the repeal are white men of significant means. In that year 54.9 percent of estate tax filers were men and 45.1 percent were women.
- Increasing the Child Tax Credit from $500 per child to $1,000 a year, could hurt working people whose earnings are too low to incur income taxes. At the same time, Bush would increase access to the credit at the upper end of its income limits.
- Expanding deductions for charitable gifts permits the well-off who itemize their deductions to shelter more of their assets, while many middle income elderly and non-home owners will not benefit because they do not have enough deductions to make it worthwhile to itemize.
Of the four main features of the Bush proposal, only the charitable deductions change might be of indirect benefit to the currently poor. If donations to charity rise substantially, groups that provide food, shelter and other social services to the currently poor could expand their work. However, these donations are not likely to be as large as current donations from large estates. The very rich often set up foundations or give large amounts to good causes in order to lower the taxable assets of their estates.
Critics See Brilliant PR Campaign That Obscures Down Sides
“They’ve done a fairly brilliant public relations job,” said Robert Greenstein, director of the Center on Budget and Policy Priorities, who warns that the down sides of the Bush plan are obscured because the White House avoids examination of the total federal taxes paid by individuals and families in different circumstances.
Greenstein said the proposed Bush cuts could consume almost all of the non-Social Security and -Medicare surpluses, leaving nothing for needed program enhancements, such as prescription drug benefits for seniors. Many of the government’s discretionary programs aid disadvantaged citizens.
To help cover the cuts, Bush proposes a growth of 4 percent in spending outside Social Security and Medicare–down from the 8 percent growth rate in recent years. And Bush sets different priorities. For instance, he wants to increase funding substantially for the National Institutes of Health, but there is almost no increase in other Health and Human Services budgets.
But by being highly selective in which federal taxes it wants to cut, the White House weakens its own arguments about fairness, Greenstein and other progressive analysts say.
At this juncture, however, 56 percent of Americans recently polled by the Gallup Organization said they favor the proposed cuts in federal income taxes. At the same time, most people don’t think the cuts will make a big difference for them.
The conservative analysis holds that the benefit of the tax cuts will filter into the economy and is likely to spur more growth and, therefore, a bigger surplus. A study by the conservative Heritage Foundation predicts a far smaller total loss of federal revenue than other analyses of the Bush plan.
About 150 groups gathered last week in Washington in a coalition to oppose the Bush tax cut plan.
“I think we can win this,” said Gary Bass, executive director of Office of Management and Budget Watch, one of the groups working against estate tax repeal. There is a growing sentiment, he said, among groups that advocate for children, among religious groups and civil rights groups that this tax plan is the wrong remedy.”
Glenda Crank Holste is a Twin Cities journalist who writes about economic and social policy.