Bush's Tax Savings: Unreal!
For months, President Bush dropped the names of "real Americans" into his prepared speeches. From the podium he regularly introduced single and two-parent families filled with hard-working taxpayers, like a hospital engineer from Georgia and a restaurant manager from Missouri. Then he declared how much they would save from his proposed tax cuts, usually around $1,600 for a family of four.
"I want to put a face on taxes," Bush told a rally in Sioux Falls, South Dakota, before introducing Scott and Tiffany Hagen, who hoped to save $1,500. "I want people to understand that tax relief is real for people."
But the taxpayers Bush brought to the stage were hardly representative of his tax cut's actual beneficiaries. He did not showcase the 21 percent of Americans who will receive no tax savings under the plan he recently ushered through Congress. Nor did he highlight the biggest winners, the nation's wealthiest 1 percent of taxpayers, who stand to reap just under 38 percent of the lost tax revenue. This was not because examples were hard to find. Indeed, some of the most telling can be found in the Administration itself.
To find out how much the Administration stands to gain, The Nation reviewed recent financial disclosures of the 2000 incomes, liabilities and most recently reported asset values for Bush, Vice President Dick Cheney and the fourteen-member White House Cabinet. Citizens for Tax Justice, a think tank in Washington, DC, estimated the officials' deductions by comparing them with those of taxpayers of similar income levels. The group then calculated what the officials' approximate tax savings would have been if the tax cut plan approved in May had been fully implemented in 2000.
The analysis found that even within this select group of sixteen officials, which includes at least twelve millionaires, the income tax cut would mean vastly different levels of savings. While several Cabinet members would have saved about as much as one of Bush's family examples, the wealthiest seven officials would each have saved more than $16,000 from the income tax cut. And as with the nation as a whole, the biggest windfalls would go to the wealthy few.
For instance, two retired CEOs, Dick Cheney and Treasury Secretary Paul O'Neill, would have reaped a combined $4.9-$5.2 million if the tax cut had been in effect last year, largely because of the considerable parachute payments they received by leaving Halliburton and Alcoa, respectively. Defense Secretary Donald Rumsfeld, who has amassed a fortune with the help of prominent Republican campaign contributors, would have added between $590,000 and $890,000 to his take-home pay--more than three and a half times his $161,200 salary as a member of the Cabinet.
A repeal of the estate tax, which Congress also approved, promises to bring even more savings to the Administration's families. According to their disclosure forms (which, rather than requiring precise values, allow officials to choose spreads), the wealthiest seven officials have combined assets of between $188 million and $632 million. A repeal of the estate tax would give their families a tax savings of between $82 million and $310 million, most of which would go to the families of O'Neill and Rumsfeld, the wealthiest two. For the approximately 98 percent of Americans unaffected by the estate tax because they don't own enough, the repeal brings no savings.
Such inequities have not gone unnoticed on Capitol Hill, where elected officials are accustomed to public scrutiny of their private finances. "Congress comes in for just a cost-of-living increase, and the public is outraged," said Representative Henry Waxman, a Democrat from California who has noted the personal benefit of the tax cut for members of the Bush Cabinet. "They are certainly getting a huge jackpot, far greater than anybody ever talked about with the cost-of-living increase."
The value of the tax cut could grow even further after the Cabinet members leave office. Officials like Cheney, Rumsfeld and Secretary of State Colin Powell have already shown a keen ability to leverage political connections into private wealth. Powell alone made more than $6.8 million from speaking fees last year. Labor Secretary Elaine Chao, who worked at the Heritage Foundation, was able to take home an additional $162,750 by serving as a director at six different companies, including Clorox and Northwest Airlines. Treasury Secretary O'Neill--who has said he'd like to get rid of all corporate income taxes--did even better, making $365,799 by serving as a director for seven companies other than Alcoa, including Lucent Technologies and Eastman Kodak.
"This does seem to be the most heavily business-derived Cabinet since Eisenhower," said Columbia University history professor Alan Brinkley, adding that it is also probably the wealthiest in history. Since the financial disclosure rules for the executive branch were established relatively recently, in the wake of Watergate, such comparisons are difficult to make with certainty.
It is clear, however, that the Hagen family of South Dakota, eager for a $1,500 tax break, will reap far less than those running the government. At last year's income levels, Rumsfeld would have saved at least 393 times as much as the Hagens, and Bush would have saved about fifteen times as much, or $23,000. Meanwhile, the median American family with children will get by this year on an estimated before-tax income of $45,600. At the rally in South Dakota, Bush did his best to minimize this divide with a scripted expression of empathy. "$1,500 may not be a lot to some," he told the crowd. "It means a lot to the Hagens." One can only guess what a total tax savings of at least $88.3 million would mean to Bush and fifteen of his closest advisers.