(The following statement by AFL-CIO President John J. Sweeney regarding President Bush’s dividend tax cut proposal was issued on January 3, 2003.)
WASHINGTON, D.C. — When the President says that he expects “class warfare” from those who oppose his proposals to give breaks to the very wealthiest taxpayers, he is apparently hoping to deflect attention from the facts about who benefits from his plans. But the truth – demonstrated once again with his proposal to cut the dividend tax for investors under the guise of stimulating the economy – is that it is he and the rich who have declared war on working people and the poor in this country.
Working families have taken a beating for the 22 months since the official start of the 2001-2002 recession. Layoffs are mounting and as the unemployment rate rises, urgently needed new jobs are nowhere in sight. Good health care is under siege. When it comes to what matters most to average Americans, things are worse now than ever and there are no consistent signs of recovery.
Throughout the economic downturn, the President has been AWOL. So it is especially outrageous that he is trying to pass off another tax cut for the rich as a boost to the economy while warning that it may be greeted by “class warfare.”
The plain facts are that excluding dividend income from taxation will guarantee more tax breaks for the well-off but it will not create jobs, aid workers hard hit by the downturn or help average American families.
Depending on how the new cut is structured, taxpayers with incomes of more than $1,000,000 will get average tax breaks of as much as $24,230 and claim nearly 25 percent of the total benefit. The top 1 percent – whose incomes exceed $333,023 – would receive more than 42 percent of the benefit from the cut, with an average break of as much as $7,001. Three quarters of the total benefit would go to tax filers with incomes exceeding $100,000.
In contrast, tax payers with incomes below $50,000 – who file almost 70 percent of all income tax returns – would get less than 10 percent of the total benefit from the cut. For them, the average tax break is $76 or less.
Cutting taxes on dividends will provide no bang for the economy, either. American workers and the American economy need a recovery plan that kicks in quickly to create jobs that pay well and provide good benefits. The most effective job-creation program is one that stimulates demand by putting money into the hands and pockets of average families and laid-off workers who need it and will spend it. Wealthy beneficiaries of tax breaks are more likely to save and invest than to spend any additional resources, and the pay-out from the break comes too late to affect the economy now.
In making this choice, the Administration has apparently also decided against tax relief that would be more evenly distributed and widely shared by all Americans, such as rebates or tax relief for all who work and make payroll tax payments. Exempting workers’ first $10,000 in earnings from the employee share of payroll taxes, for example, would provide an average tax break ranging from $334 for the workers with the lowest earnings to just over $1100 for the highest income earners. Every worker in America would benefit, with the 70 percent of taxpayers with incomes below $50,000 getting just over half of the benefit – instead of less than 10 percent under the President’s plan.
The President should shelve the dividend cut and focus instead on a targeted recovery package that will help average American families and give the economy the lift it desperately needs.