APRIL
2001
2001
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APRIL
2001 |
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Labor’s Tax Plan: $400 to Everyone
The AFL-CIO’s plan, developed with UAW assistance, doesn’t alter the current five tax-rate brackets as the Bush proposal does. Instead, it gives every adult and child an immediate $400 regardless of family income. This one-time “prosperity dividend” will only cost the federal government $110 billion as opposed to the actual $2.6 trillion cost of Bush’s tax cut. Labor’s plan also includes a refundable child tax credit and a break on the taxpayer‘s share of the Social Security and Medicare payroll taxes. Labor’s tax plan best reflects the priorities and values expressed by the majority of Americans in poll after poll and during last November’s election. A February poll by ABC News and the Washington Post asked Americans how the federal budget surplus should be used. Thirty-five percent answered “education and health care spending,” 25 percent favored “strengthening Social Security,” 22 percent said “cut federal income taxes,” and 17 percent wanted to reduce the national debt first. “The budget surplus gives Bush an historic opportunity to lift millions of America’s children out of poverty, expand access to quality health care, and strengthen Social Security and Medicare,” commented UAW President Stephen P. Yokich. “Yet Mr. Bush intends to squander this opportunity by blowing the surplus on a tax-cut scheme based on ‘fuzzy math’ and priorities that are out-of-sync with the concerns of the majority of Americans,” Yokich said. Having proposed a tax cut last year to help win the GOP presidential primary race, Bush has now switched his argument to say that a tax cut will provide a boost for a slowing economy. The AFL-CIO’s resolution argues instead, “For tax relief to provide an efficient and effective stimulus, it must flow to those who will most likely spend it. This means ensuring that low- and middle-income families receive the bulk of the tax cuts.” Putting money into the hands of those who will spend it is best achieved with labor’s prosperity dividend. After four years, Bush’s reduction of the lower tax rate would yield a tax cut of only $212 for the single parent with two kids who he holds up as his tax cutting poster family. With labor’s prosperity dividend, this family would receive $1,200 this year. The AFL-CIO dividend saves money because it gives the wealthiest families the same $400 dividend per family member. Bush’s proposal is costly partly because it bestows upon the upper 1 percent of taxpayers the equivalent of a free Lexus ($54,000) every year. The other advantage of labor’s prosperity dividend is that it would be paid up front when it can have the most effect on stimulating the slowing economy. While Bush claims he hopes to kick start the economy, most of the tax cuts in his proposal are back loaded, not reaching their maximum until 2004. The AFL-CIO also endorses doubling the child tax credit from $500 to $1,000 like the Bush plan does, but goes Bush one better by making it refundable. A refundable child tax credit means that the low-income taxpayer whose tax bill is only $500 will pay no tax and, on top of that, will get back a $1,500 refund for her two children. Under Bush’s tax credit, this single parent will have her income reduced to zero and nothing more. She would have to have a tax bill of $2,000 or more to be able to get the full benefit of the Bush child tax credit. The AFL-CIO estimates their benefit will only cost $44 billion annually. Another example of a tax credit that puts more money in the hands of those who need it and will spend it is the AFL-CIO’s refundable tax credit that exempts the first $5,700 in earnings from the employee portion of the payroll taxes (Social Security and Medicare). That would only cost $45 billion, according to the AFL-CIO, but it would yield an annual tax cut of $427 per taxpayer.
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The
AFL-CIO has injected into the national debate its own tax proposal--one
that would put more money into the hands of low- and middle-income working
families while leaving far more for Social Security, Medicare, education,
and paying down the debt.