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How Republican Presidents Lowered Taxes on the Rich and Raised Taxes on the Poor and Middle Class - Part 2, the Bush Sr, Clinton and Bush Jr Years

by John Lawrence

Part 1 of this series covering the Reagan years can be found here. This post relies on data from the following sources: Federal Income Tax Rates History, Social Security and MedicareTax Rates, Historical Capital Gains and Taxes and Party Control of Congress and the Presidency. In the first part we pointed out that Reagan under the tutelage of Ayn Rand lover Alan Greenspan flattened the tax code to just two rates: 15% for anyone making less than $56,427. and 28% for anyone making more than that amount. This effectively raised taxes on the poor and lowered them on the rich compared to the day Reagan entered office when the tax rate was zero on the poor and 70% on the rich. Reagan and Greenspan also drastically raised Medicare and Social Security (payroll) taxes which affect mainly the poor and middle class. Bush Sr served from 1989 till 1992 when Clinton took over. In 1991 under a Democratic Congress, Bush Sr raised taxes despite his pledge not to. Remember his campaign promise: "Read my lips. No new taxes." However, despite the big brou ha ha, Bush did not raise income taxes on the poor and middle class; he only raised them on the rich. You would think that, if the middle class and poor were paying attention, they would have been satisfied with this development and reelected Bush in 1992. But the Republicans and right wing media talking heads raised such a hue and cry, convincing voters that Bush Sr had raised taxes on all people and not just the top few percent, that Bush was defeated and Clinton elected. What Bush did was to add a third tax bracket of 31% for incomes over $135,336 while leaving unchanged the two lower tax brackets. Bush "unflattened" the tax code slightly which should have raised a cheer among the middle class, but it didn't due to the fact that they were convinced by the right wing punditry that Bush raised taxes period, end of story. They didn't distinguish whom Bush raised taxes on. They only paid attention long enough to understand that Bush raised taxes.

Bush Sr also raised FICA and SECA (Social Security and Medicare) taxes. These went from 7.150%  for employees and employers in 1987 to 7.51 in 1988 and 1999. The corresponding rates for the self-employed went from 14.3% in 1987 to 15.02% in 1988 and 1989. So what Bush gave with one hand to the poor and middle class in the form of not raising their income taxes, he took away with the other by raising FICA and SECA taxes which affect mainly the poor and middle class. The net effect was to make the total tax burden on the middle class as great or greater than the tax burden on the rich since the rich pay little FICA and SECA tax compared to their total income. Bush Sr and the Republicans were at it again in 1990, a year in which they raised FICA and SECA taxes to 7.65% for employees and employers and 15.3% for self-employed where they have remained to this day. So Bush Sr was not such a traitor to his class as one might think from just considering the income tax structure alone. The net effect was that he raised taxes on the poor and middle class much more than he raised them on the rich.

Bush Sr had a Democrat controlled Congress during his four year term and they managed to raise the capital gains tax from 28% to 28.93% in 1991, a piddling amount compared to the huge decreases which were to come later during the Bush Jr administration. So the rich had their capital gains taxes raised for the last year of the Bush Sr administration through no fault of Bush's own. It was the Democrats who pushed this tax increase through.

Clinton took over in 1993 and with a Democratic Congress unflattened the tax code even more adding two tax brackets at the high end. The following is the tax table for married couples filing jointly, inflation adjusted.

Table 1 - 1993 - Married Filing Jointly

Marginal            Tax Brackets
Tax Rate      Over       But Not Over

15.0%            $0           $57,298

28.0%       $57,298        $138,432

31.0%       $138,432      $217,392

36.0%       $217,392      $388,200

39.6%       $388,200 -

____________________________________________________________________

Despite the fact that Clinton raised only taxes on the rich and kept them the same on the poor and middle class, a fact that the vast majority of voters should have been happy with, Republicans managed to tag Clinton and the Democrats with the "tax and spend" and "big government" labels. FICA and SECA taxes remained the same under Clinton.

In 1994, half way into Clinton's first term, Republicans took over control of Congress. Despite that fact the income tax code remained substantially unchanged for the rest of Clinton's Presidency with the result that, by the time Clinton left office in 2000, there was a budget surplus and the nation was on track to eliminate the national debt entirely.

Capital gains taxes were a different story. They went from 28.93% in 1991 to 29.19% in 1993. The poor and middle class swallowed the Republican hogwash about Clinton raising their taxes and elected a Republican Congress in 1994. The Republican Congress slashed the capital gains tax all the way back to 21.19% in 1997 where it stayed for the remainder of the Clinton Presidency. So despite the fact that during the Clinton years income taxes were raised on the rich, capital gains taxes which affect primarily the rich were substantially reduced. The net result was that taxes on the rich were effectively lowered and despite that fact Clinton was able to run budget surpluses during his last few years in office. Go figure!

George W Bush was elected in 2000. Then the tax cutting which led to huge deficits began - with a vengeance. "You know how to spend your own money better than the government does." The Republicans were great at formulating slogans and defining the situation. What were the Democrats supposed to say to that: "The government knows better how to spend your money than you do"? Consequently, in 2001 the top tax rate was lowered by .5% from 39.6% to 39.1%. The middle three tax rates were lowered .1%, and the tax rate for the poor, the lowest tax bracket was not lowered at all. The net effect was to give the rich a big tax cut, the middle class a modest tax cut and the poor no tax cut. Here is the tax table:

Table 2 - 2001 - Married Filing Jointly

Marginal            Tax Brackets
Tax Rate      Over       But Not Over

15.0%       $0                $57,267

27.5%       $57,267        $138,416

30.5%       $138,416      $210,950

35.5%       $210,950      $376,732

39.1%       $376,732

____________________________________________________________________

In 2002 another half a percent was cut for the four highest tax brackets and in addition a new bracket was added at the bottom thus reducing taxes on the poor to 10% up till an income of $14,967. The 15% tax bracket was the only one not cut thus making a mockery out of tax cuts for the middle class. Here is the tax table for 2002:

Table 3 - 2002 - Married Filing Jointly

Marginal            Tax Brackets
Tax Rate      Over       But Not Over

10.0%          $0             $14,967

15.0%          $14,967     $58,246

27.0%          $58,246     $140,752

30.0%          $140,752   $214,464

35.0%          $214,464   $382,967

38.6%          $382,967

In 2003 there was another tax cut ... of course ... but only for the rich and upper middle class, not for the middle class or the poor!! 3.6% was cut off the top tax rate! 2% was cut from the next three tax rates leaving the bottom two tax rates all the way up to an income of $69,265 virtually untouched!! All the while the right wing propaganda machine was out to convince everyone that Bush Jr was cutting taxes for E..V..E..R..Y..B..O..D..Y. Here are the sad results:

Table 4 - 2003 - Married Filing Jointly

Marginal            Tax Brackets
Tax Rate      Over       But Not Over

10.0%          $0              $17,072

15.0%          $17,072      $69,265

25.0%          $69,265      $139,810

28.0%          $139,810    $213,039

33.0%          $213,039    $380,409

35.0%          $380,409

After 2003 the income tax cutting frenzy for the rich was over at least for the remaining years of the Bush Jr administration. The 2003 tax table was for all intents and purposes the tax structure that President Obama inherited when he became President in 2009. The same tax structure remains in effect till this day, Obama having failed to end the Bush tax cuts due to Republican intransigence and obstructionism and to raise the top rate back to the 39.5% that it was in the last years of the Clinton administration. As a consequence structural budget deficits continue to add immense sums to the national debt, and there is Republican pressure to cut spending on social programs like Social Security, Medicaid and Medicare but, of course, they don't want to reduce spending on the military. Obama may force their hand by ending the wars in Iraq and Afghanistan and talking up his desire on the campaign stump to spend half the savings on deficit reduction and half on rebuilding infrastructure, but he will need a Democrat controlled Congress to do anything of the sort.

In addition to the Bush Jr income tax cuts for the rich, he also cut capital gains taxes substantially during his term in office, an even greater boon to the rich than the income tax cuts. Capital gains taxes went from 21.19% in 2000 to 21.17% in 2001 and 21.16% in 2002. Then in 2003 they went all the way down to 16.05%. That was followed by a drop to 15.07% in 2006 and further down to 15.35% in 2008 where they remain today. The combined income and capital gains tax cuts which benefitted primarily the rich produced disastrous budget deficits, and, since structurally the Bush tax cuts remain in effect, the Obama administration is forced to run huge budget deficits which Republicans disingenuously blame him for although they refuse to raise taxes on the rich or let the Bush tax cuts expire which would ameliorate the situation.

Raising the top income tax rate back to 39.5% and the capital gains tax back to 28.93% (an almost doubling of capital gains tax) where they were under the Clinton administration would do a huge amount to eliminate the budget deficits that Obama is unfairly being tagged with. Adding more tax brackets for incomes above $382,967 where the highest rate now kicks in would also provide even more desperately needed revenue. Today when the Fortune 400 is composed exclusively of billionaires, tax brackets in the millions and billions of dollars are appropriate and only fair. Obama has presented this rather cleverly as the Buffet rule: a boss shouldn't be effectively taxed less than his secretary. Today most billionaires pay an effective tax rate around 15% since most of their income is composed of capital gains. The only way to implement the Buffet rule is to raise the capital gains tax since the income tax no matter how high it becomes for millionaires and billionaires will hardly affect them. In addition a financial transaction tax could raise as much as $100-$200 billion a year.

If You Want More Debt Vote Republican

Published on Sunday, October 31, 2010 by CommonDreams.org

by Robert Freeman

One of the most successful deceits of the past thirty years is that Republicans are the party of "fiscal discipline." In fact, Republicans are the party of fiscal wreckage. Simply put, Republicans love deficits and debt. They have buried the country with them. They expand them with orgiastic fervor every time they get the chance. Until we come to grips with this simple truth we will never gain control of our fiscal destiny.

In 1980 the national debt stood at $1 trillion. Over the prior 204 years, the nation paid for the Revolutionary War, the Civil War, the build-out of an entire continent, the First World War, the Great Depression, the Second World War, Korea, Vietnam, and the better part of the Cold War. And through all that, we still only borrowed $1 trillion.

But over the next 12 years of relative peace and prosperity, Republicans Ronald Reagan and George H.W. Bush would quadruple the national debt, to $4 trillion. They did it by dramatically lowering taxes on the wealthy and furiously expanding government spending. This isn't even economics, it's arithmetic: bring in less income while spending more money, and the result is debt. Mountains of it.

Bill Clinton reversed the Republicans' destructive formula, raising taxes on the rich and cutting spending to 17.4% of GDP, a level not seen in 30 years. The result was the longest economic expansion in American history. More than 20 million jobs were created, another record, while the stock market tripled. Most importantly, Clinton produced the first budget surpluses since 1969, handing George W. Bush a $140 billion surplus.

Bush immediately returned to the tried-and-true deficit producing policies of Reagan and his father. He lowered taxes on the wealthy through a $1.6 trillion giveaway in which 50% of the gains went to the top 1% of income earners, his "base" as he called them. And he expanded spending to 20% of GDP by initiating two wars, lying to pass a $600 billion giveaway to the pharmaceutical industry, and more.

Again, bring in less income, spend more, and the result is debt. Under Bush's catastrophic economic stewardship, the national debt more than doubled, from $5.6 trillion to over $12 trillion while producing the greatest economic collapse since the Great Depression.

A Republican has occupied the White House for 26 of the past 40 years. Not once in any of those years has any Republican president mustered a single balanced budget. So, the fact that Republicans love deficits and debt and expand them whenever they get the chance is not an ideological or political construct. It is the empirical, manifest conclusion of their own policies and actions. Those are the facts.

Less well understood is why this is so. But like the record itself, it is important that Americans know why it is that Republicans love debt. The reasons are two-fold and straightforward.

The first and most important reason Republicans love debt is that they make more money when there's more debt outstanding. The wealthy, after all, are lenders. They would prefer everybody-governments, companies, individuals-be up to their eyeballs in debt. That way they can charge everybody obscenely high rates of interest, as they do the desperately poor who use payday lending facilities with interest rates in the hundreds of percent a year.

The wealthy will collect almost $4 trillion in interest payments in the U.S. this year-27% of the entire $15 trillion GDP going to pay interest! And that's a time of extreme slack in the economy. As the economy recovers and demand for borrowed money increases, rates will rise. Imagine the obscene interest the country will be forced to pay on its $14 trillion national debt when the U.S. government itself becomes a payday borrower!

Which points to the second reason Republicans love debt. At some point it becomes so onerous it will bankrupt the government. This will make it impossible for the government to carry out its essential functions. It will have to sell off assets to its creditors, just as it is doing now, to raise money.

The same wealthy interests who caused the nation to go bankrupt will then buy up public resources at pennies on the dollar. That's how foreclosure sales work. They will then sell the services from those resources back to the public at monopoly rates. We see this around the country where thousands of cities and dozens of states are already selling off essential assets in exchange for a one-time infusion of cash.

Arizona selling off its state-house. Michigan selling the bridge to Canada. States across the country selling their toll-roads, airports, prisons, water systems, parks, even police and fire departments. School districts selling their schools in the guise of making them "charters" when in fact, they are franchised corporate education providers: McSchools.

Privatization of everything is the goal, with no public sector. You can do it when you have bankrupted the government. This is Republican nirvana: the rich paying essentially no taxes; extracting trillions of dollars in interest payments from captive, maxed-out borrowers, public and private; and owning all the public resources (in addition to all of the private resources which they already own). How much better can it get?

The second advantage of bankrupting the government (at least from the vantage of Republicans), is regulatory. It leaves no institutional force in society capable of standing up to the concentrated power of big capital.

This is what made the recent financial meltdown possible: regulation had been gutted, allowing the predators to run amok through the economy. It is what enabled the catastrophic oil spill in the Gulf of Mexico: little or no regulation on the oil companies.

What Republicans want in the private sphere is untrammeled dominion over desperate workers. In the public sphere, they want the ability to cow the government to do its bidding and to transfer all governmental operations to private hands. Bankrupting the government through onerous debts is the surest way to do both, for who, then, can stand up for the interests of the public? Or for democracy, for that matter?

Republicans have gotten so good at drowning the country in debt they even baked it into Obama's administration. According to the non-partisan Congressional Budget Office, almost ninety percent of Obama's deficits are due to policies and events initiated by George W. Bush: massive tax cuts for the rich; two unendable wars; and-once again-the greatest economic collapse since the Great Depression. Without these albatrosses Obama's budget would be almost in balance.

Republicans want nothing to do with policies that actually reduce deficits. If they did, they would have mustered more than a façade of concern over the past 40 years. But they haven't. And the most insufferable part of it all is their unctuous posturing about "fiscal discipline." It's like Heidi Fleiss posing as a model of moral probity, all the better to sucker more two-faced Johns into her bordello.

It was Cicero, in 45 B.C., who laid out the simplest formula in history for understanding such matters. They are the two most powerful words in political forensics: "Qui Bono?" Who benefits? When we answer this question and look at their record, we learn everything we need to know about Republicans and debt. All the rest of the posing is a sham. It's a shame the Democrats don't have the backbone to call this truth for what it is.

Robert Freeman writes on economics, history and education. His earlier pieces, "The Five Circles of Economic Hell," and “The U.S. is Facing a Weimar Moment,” were also published on CommonDreams.  He can reached at robertfreeman10@yahoo.com.

Bill Clinton Redeems Himself

Published on Friday, April 23, 2010 by The Oregonian

Bill Clinton's Contrition Contribution

by David Sirota

In 1992, I was in 10th grade. Hence, I didn't care about much more than the girls I could never get, the Philadelphia 76ers' playoff chances and the shortcomings of my own unimpressive basketball career (in that order) – and I certainly didn't care about politics. So when my teacher assigned me to represent a Southerner I'd never heard of in a mock presidential debate, I was, um, not psyched.

My attitude changed, though, when I started researching – wait, what was his name again? Oh, right – Bill Clinton. To my surprise, what I found was inspiring. The lip-biting saxophonist seemed like a forthright guy with some heartfelt "feel your pain" outrage at the unfairness of the moment's Gordon Gekko zeitgeist. An early campaign speech I discovered particularly captivated me – the one in which Clinton said, "I expect the jetsetters and featherbedders of corporate America to know that if you sell your companies and your workers and your country down the river, you'll be called on the carpet."

Call me crazy or gullible – at 16, I was probably both – but I bought it. If not for Clinton's campaign (and that irrepressibly optimistic Fleetwood Mac jingle), I might have followed star-crossed hoop dreams already doomed by my god-awful jump shot. Instead, I chose a political path, genuinely believing in that place called hope.

This naive faith, of course, is why I would later come to detest Bill Clinton.

Upon assuming office, he championed the very corporatist policies he railed on – lobbyist-written free-trade pacts and financial deregulation, to name a few. To me, a fervent supporter turned spurned groupie, Clinton eventually looked like an opportunist who knew he was selling out – and yet sold out anyway.

Because of his reversals, I ended up in my adult years being critical of Clinton – so consistently critical, in fact, that I'm shocked to find myself about to spend the next few paragraphs praising him. No, not for his (admittedly impressive) humanitarian work, but for his recent contrition.

Whereas former presidents typically devote their retirements to history-revising legacy preservation, Clinton is laudably doing the opposite – and the nation will, hopefully, benefit.

It began with his congressional testimony last month. Discussing his administration's trade policy, Clinton admitted that it "has not worked" to alleviate poverty, as promised.

"It was a mistake," he said of his agribusiness-backed initiatives forcing impoverished countries to eliminate tariffs. "It was a mistake that I was a party to ... I had to live every day with the consequences of the loss of capacity to produce a rice crop in Haiti to feed those people because of what I did."

Clinton didn't stop there. In a subsequent ABC News interview, he said that when it came to 1990s-era financial deregulation that so harmed today's economy, "I think (my advisers) were wrong, and I think I was wrong."

Some will undoubtedly say "too little, too late." But with Clinton having nothing to gain from these admissions – and, really, lots to lose – the 10th-grade idealist in me says "better late than never."

Better he acknowledge the failure of misguided trade and deregulatory initiatives, rather than pretend they succeeded. Better he apologize for the betrayals that deflated his supporters, rather than feign indifference. Why? Because the penitence may now spur change.

Clinton's compunction could, for instance, convince President Obama to shelve new free-trade proposals and avoid undermining Congress' current financial regulatory legislation. It may compel Obama to fire the same Clinton economic aides who now work in his administration. And it might even prompt a nation of exceptionalists to admit its errors and actually reform itself.

After all, if Clinton can learn from mistakes, then America should be able to do the same.

 

© 2010 Creators.com

David Sirota is a bestselling author whose newest book is "The Uprising." He is a fellow at the Campaign for America's Future and a board member of the Progressive States Network-both nonpartisan organizations. Sirota was once US Senator Bernie Sanders' spokesperson. His blog is at www.credoaction.com/sirota.