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Volume 18: Voting in the 2004 ElectionsTax Cuts: Who Do They Help?By Silja KallenbachHow many potholes could the government have fixed with the money it returned to you as your share of the 2003 tax cut? The answer depends on your income. The more you earned in 2003 the more you'll receive as your share of the cut. If your income was below $45,000 and you have children under 17, the average tax refund was around $500. If your income was below $28,000 and you have children under 17, it was only $105 per year. You would have to have made over $104,000 a year to reap over $1,000. When you put it all together, though, that's a lot of potholes that could have been fixed, highway bridges that could have been repaired, teachers who could have been hired, firemen who could have been paid. The question is: are you willing to pay for all the services you expect to receive from your local, state, and federal governments or do you think the tax money is better off back in your pocket? Many people want to pay less in taxes but they also expect to receive all the same services that tax dollars pay for. They want better schools and Medicare coverage, longer unemployment benefits, streets paved and the snow plowed, and protection from crime, bacteria and natural disasters. (Take a look at the list of what your taxes pay for on this page.) Americans actually pay some of the lowest taxes of any industrialized nation. On the average, middle-income people pay 26 %t of their income in taxes whereas in Canada they pay 38.2 %, and in Sweden 52.2 %. In these other countries, people have chosen to pay more taxes so that they have more benefits such as a universal medical plan, year-long maternity leave, higher education that is much less expensive to the individual than is the case here. In the U.S., most people's federal taxes have not gone up in the past decade; in fact, the wealthy have had their taxes cut 56 % in the last 40 years. Yet there are 46 million of us without health insurance and a crisis in the rising costs of a college education. Taxes on corporations and on the wealthyCorporate taxes are at an all-time low. The percentage of their profits that corporations have to pay in taxes has been cut in half from almost 50% in the 1950's to an average 25%. Tax breaks that were put into place in 2002 and 2003 reduced tax revenues from businesses by over $50 billion. Less than 10% of the federal taxes collected comes from corporations. This means that most of the rest of the money that the federal government has to spend must come from individuals. Some of the recent tax breaks given to corporations are supposed to expire in the next few years. Naturally, corporations are pressuring politicians to extend them. The argument goes that if you cut taxes on corporations and the wealthy, the money will eventually 'trickle down' to the average worker. It says that tax breaks help corporations save money that they will then invest in expansion and new jobs. In the same way, this argument assumes that if the rich pay fewer taxes, they will spend more money, say by buying a new car, and that money then goes into the pockets of the company and its workers. As it turns out, the rich are more likely to save money they receive as part of a tax cut, not spend it, while lower income people are the ones more likely to spend it since they have greater immediate needs. According to economist Mehrun Etebari, "Overall, data from the past 50 years strongly refutes any arguments that cutting taxes for the richest Americans will improve the economic standing of the lower and middles classes or the nation as a whole." What "trickles down" is not wealth for all. One problem with tax breaks for individuals and corporations is that the costs, in terms of lost public revenue, are much higher than the benefits to the economy. Tax breaks to corporations may lead to some new jobs being created, but at a very high price. Because the government is taking in less money than it needs to pay for present needs, it has to borrow large amounts that will have to be paid off by future generations of taxpayers. A close look at patterns of growth in people's wages and in new jobs shows that there is no relationship between these and lower taxes. In fact, the statistics from the past two decades show that people's incomes and hourly wages increased more in years with higher tax rates! The $200 billion in tax cuts in 2003 is equivalent to the average salaries of four million workers. Instead of trying to stimulate the economy with tax cuts, another approach would have been to create jobs for people with the money the government gave away in tax cuts. By choosing to cut taxes, the government is pursuing a strategy that favors the wealthy rather than the average worker.
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