The Big Heist
With strikes brewing in Hollywood, Washington has been picking up the slack these last weeks. George W. Bushs tax proposal will need extraordinary amounts of makeup and soft lighting to pass for anything other than what it is: a wildly ambitious money grab for the richest of the rich. Thus the usual well-scripted news-conference charades have reached an unprecedented level of spectacle. In high Ed McMahon fashion, taking further cues from reality TV, Bush has handed giant checks for $1,600 to what he calls real, live people, grinning citizens dragged out for the occasion like Wheel of Fortune contestants. Never mind that 90 percent of American households will get less than that -- spin the wheel.
The Democrats havent been slacking either: Senate Minority Leader Tom Daschle went so far as to dirty his hands on used auto parts to illustrate the point that Bushs plan will buy a new Lexus for anyone pulling in $300,000 a year, and a muffler for someone making $50,000. Daschles numbers are striking. Bowing to the deities of American politics (middle-class families of four) as Democrats have for the last eight years, he chose to neglect mentioning those for whom a new muffler -- or a car to put it on -- is a big deal: the poor, whose ranks have swelled throughout the Clinton boom years.
Its easy to forget now that dot-com layoffs are threatening even those in the comfortable middle, but the new economys loot has never been equitably shared. Wall Street money, enriching some quite fabulously, has trickled down into the middle class. Unemployment has dropped precipitously, but most of the new jobs created at the lower tiers, particularly in L.A., have been low-wage service and manufacturing positions, the latter not in the unionized defense and auto plants of yesteryear, but in sweatshops. A study released in August by the Los Angeles Alliance for a New Economy found that over the 1990s, poor families rose from 36 percent to 43 percent of the population in Los Angeles, and now account for some 4.1 million residents.
The rub is that most of L.A.s poor work: 64 percent live in a household in which at least one person works full time. A minimum-wage worker in L.A. would have to put in 120 hours a week to pay the rent on the average two-bedroom nonluxury apartment, which, thanks to higher levels of disposable incomes among the middle classes, has leaped up to $900 a month. Meanwhile, almost twice as many people in L.A. lack health insurance as in the rest of the country, including 59 percent of the working poor.
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I asked Bob McIntyre of Citizens for Tax Justice (CTJ) in Washington, who has extensively analyzed the Bush tax plan, what the tax cuts will do for these working poor. Zero, he said. As hard as Bush tries to spin it, an income-tax cut will do next to nothing for most of those stopped at that infamous tollbooth to the middle class for the simple reason that the poor pay almost no income tax as it is. A couple with two children dont begin paying income taxes until they earn more than $28,215. They do, however, pay substantial amounts in Social Security and Medicare payroll taxes, which are completely regressive, and which will remain so under the Bush plan.
In a radio address at the beginning of the month, Bush waxed hypothetical: Picture a diner in one of our cities, he said -- lets pretend its L.A. -- and a waitress serving coffee and toast to a wealthy lawyer, inexplicably slumming at a low-rent dive. Both have two kids. The waitress earns $25,000, the lawyer 10 times that amount. We can flesh the picture out a bit by giving the lawyer a home in the clean mountain air of La Cañada and the waitress a cramped apartment in polluted South Gate. The lawyers kids go to Harvard-Westlake, the waitress to public school. The lawyer drives the proverbial Lexus; the waitress rides the bus and has no use whatsoever for Tom Daschles muffler. You can guess whose kids have health insurance.
For the waitress, Bush boasted, our plan will wipe out her income-tax bill entirely. Sounds great, except that its more than likely she didnt have to pay income taxes in the first place. If she happened to be single and spent just $100 a month on child care, she would get back less than $200, which might almost buy a months health insurance for her kids. The lawyer would get back at least $3,100, enough for a weekends shopping spree in Palm Springs.
The Bush proposals sinister beauty is that it will benefit everyone but those who need help the most, though the goodies dont really start flowing in unless youre already truly loaded. According to CTJs analyses, while the bottom 60 percent of the country get 13 percent of the tax cuts, about $227 each, the top 1 percent, whose average income was $915,000 in 1999, will get 43 percent of the booty. Their average tax break would be $46,000. Bush himself, who in his game-show-host mode chortlingly admitted to being the only representative of the upper tax bracket onstage, would see a windfall of $100,000, McIntyre estimates, if his 1999 earnings of $1.4 million in interest, dividends and capital gains were added to his $400,000 presidential salary.
In a typical family-values PR push, the Bush tax cut, McIntyre pointed out, is very tilted toward couples and families with children. Even then, though, its only tilted toward certain families: predictably, the rich ones. Bushs magic number -- $1,600 -- comes from his doubling of the child tax credit from $500 to $1,000 and eliminating the so-called marriage penalty. A couple with two children would thus ostensibly get $500 per kid and a bonus of $600 for not producing illegitimate spawn. But the per-child benefits only kick in once youre making enough money to pay income taxes. The main beneficiaries will be parents earning between $110,000 and $200,000, who are currently not able to take a child credit. Were going to give everyone with a child $500, but were going to exclude the people who really need it, McIntyre said. Well give $1,000 to a family with two kids if theyre making $180,000, but we wont give it to a family making under $30,000. Its an odd set of priorities.
The same priorities apply to the marriage penalty. Middle- and upper-class families will indeed save. The marriage penalty will henceforth apply only to those earning little enough while single that they qualify for the Earned Income Tax Credit, which, under Clinton, came to almost entirely replace welfare assistance. If two low-income individuals who are single, one having children, both making $15,000 to $20,000 a year, were to marry, explained David Kaun, economics professor at UC Santa Cruz, they would lose that. The message is, If youre making over $150,000 a year and you marry, were going to help you out. If youre making under $20,000, youre going to be worse off.
Bushs case for the tax cuts stems from the surplus. There may be an extra $2.7 trillion in the governments coffers over the next few decades, he figures, why not give some of it back? Of course, almost everyone admits that the surplus projection is speculative, and even the Congressional Budget Office, which calculated it to begin with, concedes that its also possible well have a half-trillion-dollar deficit instead. But if that surplus -- the product of years of good fortune on Wall Street and Clinton-era cuts in social spending -- does come to pass, and the Bush tax cut slides through Congress, the legacy of the last decade will be an unprecedented bipartisan effort toward that great socialist bugaboo, the redistribution of wealth, but upward, ever upward, from under the mattresses of the worst off into the vaults of the rich.
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