Wow! I certainly feel welcomed after the response to yesterday's diary, if perhaps a bit overwhelmed. Thank you all for the warm reception. Here's a guest editorial that I had in the local paper last week.
Bait and Switch Tax Cuts
For the last thirty years every President and every Governor has proclaimed new and bigger tax cuts. Governor Pataki claims that, under his administration, New York has cut taxes more than any other state in the union. With so much tax cutting going on for so long, it's a wonder that we're still paying any taxes at all. Yet most people will insist that their taxes keep on rising and the calls for tax cuts keep getting louder rather than fading away, as you might expect. What's really happening? Why do you feel like your taxes are going up in spite of all the tax cuts?
The truth is that we're the victims of a massive bait and switch scam. Here in New York the Governor proudly points out that the top income tax rate has been cut in half. That sounds great, but I don't pay the top tax rate. You probably don't either. What he doesn't tell you is that the bottom tax rate has doubled. Nearly all of us pay that rate on at least part of our income. Thirty years ago we had more tax brackets with a lower bottom rate and a higher top one. If we simply returned to those brackets, adjusted for inflation, 95% of us would pay less than we do now, and the wealthiest 5% would pay more. The state would also take in $7.7 billion more and solve its budget problems. In other words, taxes have indeed been cut by $7.7 billion, but every cent of that cut went to the richest 5%. Then 95% of us had our income tax increased, so that the top 5% could get an additional cut. I've illustrated the situation with State income tax, but a similar thing has happened at the federal level. Is it any wonder that the gap between the wealthy and everyone else is getting larger every day?
But this is only half the story. While the State reduced its taxes, it didn't reduce the spending. It simply required lower levels of government (counties, towns, cities, and school districts) to pick up a greater share of the cost. Those governments have been forced to turn to sales tax and property tax to cover the expenses shifted to them by the State. These taxes fall much more heavily on those who earn less and both have been steadily rising for decades. The Federal government has used a similar approach, cutting income tax for the wealthiest and then shifting expenses to states. So, after three decades of highly publicized tax cuts most of us are paying more income tax, more payroll tax, more sales tax, and more property tax.
None of this is going to change until the American people wake up to what's been going on and stop being taken in by phony tax cut promises. If we continue to jump on the bandwagon every time a politician promises a tax cut, we'll continue to fall for the bait and switch tax shifts that we've "enjoyed" for 30 years. This year Gov. Pataki's budget again proposes multiple new or increased taxes for most of us, but cuts taxes for those earning over $100,000 per year.
Those who have the most money pay the lowest percentage of it in taxes, and all the rest of us are subsidizing their repeated cuts. It's time to start demanding tax reform rather than tax cuts. We don't need lower total taxes; the United States already has one of the lowest levels of taxation of all developed countries. What we need is greater fairness in who is paying them.