Federal Budget and Taxes

According to IRS statistics, Americans’ average income was lower in 2005 than it was in 2000. Incomes for the very rich are another story. Households making more than $1 million a year, which constitute less than a quarter of 1 percent of taxpayers, reaped nearly half the increase in total income since 2000.

The Bush administration’s response? When asked about government reports showing that average incomes were lower than when the administration took office, a White House spokesman responded by saying this fact “should not surprise anyone.”

It certainly does not surprise UAW members that the Bush administration’s tax and budget policies have been skewed in favor of the wealthy at the expense of working families and the nation’s economic future.

Since 2001 President Bush and GOP members of Congress have repeatedly pushed irresponsible tax cuts that largely benefit corporations and wealthy individuals. This includes the major tax bills that were enacted in 2001 and 2003, as well as the budget reconciliation tax measure that was enacted in 2006. Some of the most egregious tax breaks lowered the marginal tax rates paid by high-income taxpayers and the tax rates on capital gains and dividends. According to Citizens for Tax Justice, millionaires pocketed 62 percent of the gains from the tax cut on income from dividends and capital gains. In addition, President Bush and his allies have repeatedly advanced proposals to eliminate or drastically reduce the estate tax, which would benefit only a tiny number of the richest families in America.

The UAW believes the current tax structure is fundamentally unfair. Instead of pursuing policies to further enrich the wealthy, we believe our nation should be implementing tax proposals to help working and low income families. That’s why we support continuation of the child tax credit and the new 10 percent bracket, but believe that the rest of the Bush tax cuts should be allowed to expire.

The same tax policies that have stacked the deck in favor of the wealthy have also squandered our nation’s resources and resulted in huge federal deficits. The Bush administration and GOP-controlled Congress created the four worst deficits in American history in 2003, 2004, 2005 and 2006. While the Congressional Budget Office (CBO) estimated that the deficit for 2007 would be lower than it was in 2006, the budget outlook for the long term remains bleak. Assuming that current laws and policies remain in place, CBO projects that the federal budget deficit will grow to $215 billion in 2009 and to $255 billion in 2010.

The Bush administration has used these deficits to justify attempts to slash spending on vital domestic programs. At the beginning of 2006, prior to the Democratic victory in the midterm election, the administration rammed through Congress a budget reconciliation spending measure that cut $10 billion from Medicaid, and also reduced spending on student aid, child support programs and aid to the blind and disabled. In addition, the administration and GOP congressional leaders have repeatedly backed appropriations measures that failed to provide adequate funding for education, health care, veterans’ benefits and homeland security.

When the Democrats gained control of the House and Senate following the 2006 elections, they immediately began to pursue more progressive tax and budget policies. The budget plan approved by Congress in 2007 provided increased funds for vital domestic programs. At the same time, it rejected the Bush administration’s proposal to extend the tax cuts for corporate special interests and the rich. President Bush and GOP congressional leaders used veto threats and filibusters to try to stop efforts by congressional Democrats to pass appropriations bills to implement this budget plan. At the time this paper was written, it was unclear how the legislative battles over the various appropriations bills would finally be resolved.

During the coming years, the UAW will be urging Congress to continue to reject the failed GOP tax and budget policies, and to adopt a progressive agenda that focuses on helping working families and investing in our nation’s future. In particular, we believe Congress should adopt a progressive tax agenda that rolls back the Bush tax cuts favoring the rich, and instead helps working and low-income families. In addition, we believe Congress should approve budget policies that provide adequate resources for urgently needed investments in the nation’s infrastructure (including bridges), education and health care.

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