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September 2000
Campaign 2000: A Public Policy
Perspective
The TAX ISSUE: GORE versus BUSH
Working families in America are entitled to a fair
tax system that contributes to the cost of government based on their
ability to pay. Such a tax system is generally described as
progressive – one in which upper-income families pay a larger share
of their incomes in tax than do those with lower incomes. After
nearly two decades of "tax cuts," however, working families continue
to pay more taxes, while the tax burden for the wealthiest Americans
and corporate America continues to fall.
Electing a president committed to a tax plan that
provides for fair taxes for middle and low-income families, requires
the wealthy to pay their fair share, and closes corporate tax
loopholes will help move us in the right direction. Public employees
in particular should also pay close attention to whether candidates
are committed to adequately funding important government programs.
As we know, it takes tax revenue to provide high quality public
services.
Al Gore’s Tax Plan
Gore’s tax plan is a combination of targeted tax
cuts aimed at working families, not at reducing income taxes for
wealthy Americans. Like President Clinton, Gore wants to have the
interest savings from debt reduction used first to help pay off the
national debt, then credited to the Social Security and Medicare
Trust Funds. Beefing up Medicare is Gore’s first priority for the
budget surplus. Not only does Gore preserve Social Security and
Medicare for the "baby boomers," but he also wants to protect other
key domestic programs. Examples include funding for education, Head
Start, transportation, and health insurance.
The cost of Gore’s tax plan would total $500
billion over 10 years. Specifics of the plan include a middle-class
tax deduction for college tuition costs, expanding the EITC, tax
credits to help defray the cost of long-term health care, expanding
health care coverage through targeted tax credits, expanding the
child care tax credit, and implementing modified Universal Savings
Accounts to provide savings opportunities for working families.
George W. Bush’s Tax Plan
The Bush tax plan would reduce federal revenues by
$1.9 trillion over 10 years. If this sounds like a lot of money, it
is. The projected costs of the Bush tax cut proposal would eat up
all of the projected non-Social Security budget surpluses over the
next decade.
Unlike the Gore plan, which fits within a
responsible budget framework to pay down the debt, save Social
Security, and strengthen Medicare, the Bush plan is centered on tax
cuts that would provide the biggest dollar benefits to the
wealthiest families. Among other things, the Bush tax cut would
repeal the federal estate tax on the largest estates, permanently
extend the corporate research tax credit, and cut personal income
tax rates. Bush’s plan would leave no money to invest in education
or add a prescription drug benefit for Medicare beneficiaries.
Analysis of the Bush plan reveals that:
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The bottom 20 percent of taxpayers (earning less
than $13,600) would get an average cut of $42 a year; 0.8 percent
of the tax cut.
-
Taxpayers in the middle 20 percent income group
(earning $24,440-$39,300) would get an average tax savings of $453
a year; 8.4 percent of the tax cut.
-
The best-off 10 percent of all taxpayers (earning
$92,500 or more) would get an average tax cut of $6410 a year;
59.4 percent of Bush’s proposed tax cut.
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The top 1 percent of taxpayers (earning $319,000
or more) would get an average tax cut of $46,072; 42.6 percent of
the proposed tax cut.
Effects of Bush's Tax Plan
|
Average Income |
Average Tax Cut |
% of Total Tax Cuts |
|
$8,600 |
$ 42 |
0.8% |
|
18,800 |
187 |
3.5 |
|
31,100 |
453 |
8.4 |
|
50,700 |
876 |
16.2 |
|
86,800 |
1,447 |
20.1 |
|
183,000 |
2,253 |
8.4 |
|
915,000 |
46,072 |
42.6 |
|
Source: Citizens for Tax Justice (August
2000) |
The Bush proposal would reduce marginal tax rates
for about 2.9 million, or 20 percent, of the 13.9 million working
families with children that now benefit from the EITC. The $2.6
billion in total tax cuts for moderate-income working families with
children is only 1.9 percent of the total annual reduction in taxes
that Bush proposed. That compares to 59.0 percent of Bush’s tax cut
that benefits the best-off 12.7 million taxpayers.
Tax Plan Talking Points for AFSCME Leaders and Political
Activists
- During the Clinton/Gore Administration (FY 1993-2000), most
state programs saw large funding increases.1 For
example, the Department of Education received a 27 percent
increase in funding for such initiatives as class size reduction
and special education. The Department of Transportation benefited
from a 37 percent increase in spending. Justice Department
programs such as preventing violence against women and local law
enforcement block grants also experienced increased funding.
Growth in mandatory programs included increased Medicaid spending.
Under a Gore presidency, this critical funding stream is likely to
be maintained or increased. In contrast, under a Republican
presidency, these funds would be seriously threatened by
irresponsibly large tax cuts.
- The Bush tax plan will: 1) require deep spending cuts on
domestic programs to offset tax cuts; 2) increase Pentagon
spending sharply; and 3) offer a tax cut that primarily benefits
the affluent.
- Gore also plans to increase Pentagon spending. The difference
is that he plans to use the balance of the surplus to sustain
current domestic programs and provide more money to extend health
care for children and subsidize prescription drugs for seniors.
"That’s the core choice. Give money back – mostly to the rich. Or
invest it – mostly on working families and the poor."2
- Forty-three percent of Bush’s tax cut goes to the wealthiest 1
percent of taxpayers. The bottom 60 percent of taxpayers get about
13 percent of the benefits. "Bush provides the greatest rewards to
those who pay for his party."
SOURCES: The primary source of the detailed tax analysis for
this document is Citizens for Tax Justice (CTJ). CTJ is a public
interest research organization focusing on federal, state, and local
tax policies. Additional sources include Campaign for America’s
Future, Regional Financial Associates and Federal Funds Information
for States.
1. Federal Funds Information for States, "Issue
Brief 00-3 - Winners and Losers: How State Programs Fared During the
Clinton Administration (February 3, 2000).
2. Borosage, Robert L., "The Choice: Yachts or Health Care", http://www.ourfuture.org/
(December 17, 1999).
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designed to bring to you short overviews of current policy topics.
Our goal is to bring timely topics to your attention; the Briefs are
not intended to be comprehensive publications on any issue. For more
information contact the AFSCME Public Policy Department at (202)
429-1155 or by e-mail at ppolicy@afscme.org.
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