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Class Warfare By (Fuzzy) Numbers | The Nation

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Capital Games

 Washington: a city of denials, spin, and political calculations. The Nation's former DC editor David Corn spent 2002-2007 blogging on the policies, personalities and lies that spew out of the nation's capital. The complete archive appears below. Corn is now the DC editor at Mother Jones.

Class Warfare By (Fuzzy) Numbers

How does he do it? Every day Ari Fleischer takes the stand--so to speak--but, luckily for him, it's not under oath. That is, he provides a briefing in the White House press room and emits--oh, how to say it politely?--the most creative statements in defense of his boss's policies. A plainspoken fella--someone like our tax-cutter-in-chief--might feel compelled to brand a deceptive answer a "lie." But in the case of Fleischer v. Truth , I'm going to let you be the jury.

The case before us concerns the obsession of a powerful man and how far that man and his most trusted aides will go to serve that all-consuming passion. In other words, George W. Bush and tax cuts loaded for the well-to-do (a.k.a. people like him). After Bush unveiled his bold plan--the size of which was doubled at Bush's insistence--the task of defending the proposal (which included deep-sixing the tax on certain dividends and accelerating the scheduled reductions in income tax rates) fell to Fleischer. The President, before releasing (or unleashing) the package, had launched a preemptive strike against his critics, warning them not to engage in "class warfare" in their inevitable assault upon his tax scheme. Bush's stance provokes a natural question: why is it that handing out more money to the rich than to middle- and low-income people is not class warfare but merely noting the disparity is class warfare? (Let us stipulate that class warfare is such an ugly, anti-American tactic that any proper-thinking person ought to recoil from the charge, even though that should not always be so.)

Enter Fleischer. At the January 9 White House briefing, a reporter asked, "The President used the phrase 'class warfare' again today, alluding to criticism of his tax plan. Why is it class warfare to point out that the overwhelming majority of the tax cut would go to the wealthiest people in the country?" Fleischer answered, "Well, I'll tell you, it's class warfare to say that there are wrong people in America and these wrong people are not deserving of tax relief. The President doesn't look at the American people and say, I'm from the government, I know who the right people are -- I'm from the government, I know who the wrong people are. The President believes that's a divisive approach."

But the President does indeed say, "I'm from the government, and I know who the right people are." In this instance, he is saying that the "right people" (those deserving of a tax cut) are people who hold stocks--outside of 401(k)s and other tax-free retirement accounts--that pay out dividends. What about investors who place their money elsewhere? Why won't interest on a certificate of deposit be tax-free, under the new Bush plan? Bush is indeed deciding who gets a break. He also proposed expanding the child credit. That hardly rewards singles or couples without young ones. Tax policy is about choices, about who gets what--and choices deserve to be judged.

At the same briefing, Fleischer was pressed further on the class-warfare business. He maintained "it's inaccurate to say that the benefits will go to the wealthy" and that "because it's inaccurate, [this criticism] is used in...a way to divide and to play class warfare, in an effort to portray some Americans as unworthy of tax relief and other Americans as worthy of tax relief based on their class."

Using Fleischer's standard, Bush, by focusing on income taxes as opposed to, say, payroll taxes, is determining that low-income Americans (who do not make enough to pay income taxes but who are hit by payroll taxes) are "unworthy of tax relief." Moreover, what is inaccurate about the charge that the rich would make out like bandits under Bush's tax proposal? Citizens for Tax Justice report that one-third of the tax cut would flow to the top 1 percent (taxpayers with incomes over $374,000) in 2003. Almost half would go to the top 5 percent ($154,000 and above.) As for the top 20 percent ($77,000 and up)--they would get over three-quarters. The lower 60 percent (those pulling in $46,000 and less) would bag only 8.4 percent. How could Fleischer claim that a plan that eliminates dividend taxes and lowers the top income tax rate does not reward the well-to-do? But he did. The CTJ numbers would have to be inverted--be off by a factor of 7 or more--for Fleischer to be in the right.

There's more. Having pooh-poohed any bias toward the well-heeled, Fleischer then went on to praise the progressivity of Bush's initiative. "Because the share of taxes paid by people at the top actually goes up," he said, "because as you remove people from the bottom of the rolls...you have fewer people actually paying any taxes at all at the bottom. Therefore, the burden that is left is shared increasingly with those who remain at the top." That is correct. But while the rich may end up paying more percentage-wise, what counts--for them, of course, and for the federal budget--is what's taken out of their pockets. In that regard, their "relief" is much more--both in terms of their real tax bill and as a percentage of their income--than lower-end taxpayers. Moreover, the reduction in revenue will somehow have to be covered--by government borrowing or program cuts that tend to be of more need to low-income individuals.

In promoting Bush's contribution to progressive taxation, Fleischer undermined part of the reasoning for the tax cuts. "Let me address," he said, "one thing about why this issue about who benefits from tax cuts, I think, is such a different issue in Washington than it is in the real world. If you make $30,000 a year, and you pay, for example, $2,000 in taxes, and you receive a $1,000 tax cut, you just received a 50 percent cut in your taxes. A thousand dollars to somebody who makes $30,000 a year means all the world to them. It is a huge difference in their life. Take somebody toward the top end of the scale, somebody who makes $200,000, and they pay $50,000 in taxes. To begin with, they pay far more in income taxes, a point which opponents of the President never make. They pay far more in income taxes than others who earn less. They receive a tax cut that in dollar amounts may be larger than somebody who receives less. To them, that tax cut won't change their life as much as it does somebody who doesn't earn as much. Their life will change more so, more beneficially, than somebody toward the top."

First, his example is not supported by the CTJ numbers. According to that analysis, the average taxpayer in the $29,000-to-$46,000 income group (the middle 20 percent) will receive a total of $289 from these tax cuts in 2003. That's much less than the $1000 figure Fleischer used in his anecdote. Putting that aside, Fleischer was essentially arguing that the big earners won't see their lives changed drastically by the tax cuts. So why bother? Why defund the federal government--at a time of war, maybe two wars, maybe more--if it's no big diff to the main beneficiaries? Similarly, if it's so important to have a large impact on the lives of the lower earners, why not send more relief their way?

Fleischer engaged in additional arithmetic acrobatics. At his January 6 briefing, he pushed the tax cuts as a package that would provide 92 million taxpayers with an average tax cut of $1,083 in 2003. This is about as disingenuous as it gets. The CTJ numbers show that most of the bottom 80 percent ($77,000 and less) receive much less than one thousand bucks. The average gain for taxpayers in the $46,000-to-$77,000 slice (the second quintile) is $657. Obviously, the people below will get less. According to the Urban Institute-Brookings Institution Tax Policy Center, nearly 80 percent of income tax filers would receive a tax cut below $1083. Almost half of all tax filers would get a tax cut of less than $100. The average tax cut only hits four digits because so much is tossed at the top 20 percent. That raises the average--but has no real consequence for the under-$75,000 crowd.

When asked whether the White House disputed the notion that most of the benefits from eliminating the dividend tax would end up with better-off taxpayers, Fleischer responded, "When you look at the statistics, more than half the money from dividend taxation goes to seniors." But being a senior is not inconsistent with being wealthy. The Tax Policy Center calculates that 40 percent of the dividend-exemption benefits that would accrue to the elderly will land in the hands of seniors with incomes exceeding $200,000. Nearly three-quarters would go to those with incomes above $75,000. Fleischer was being misleading. Even if the elderly do claim half of the dividend exemption tax cut, most of that half would find its way to the top 20 percent of seniors. The Bush plans helps rich people--young and old.

Fleischer has not been the only dissembler. In his speech unveiling his tax plan, Bush sold his package by noting that a family of four making $40,000 would see its taxes in 2003 fall a whopping 96 percent from $1,178 to $45--mostly due to the expansion of the child credit. (Funny, Bush didn't tell us how much a single-parent HMO CEO would save.) As the Center on Budget and Policy Priorities notes, Bush's example could come true. But it adds, "the tax cuts that would benefit this family constitute less than one-quarter of the overall cost of the bill." In other words, you could dump three-quarters of his package and still assist middle-income families. To suggest this package overall is of direct assistance to middle- and lower-income individuals is dishonest. Only pieces of it--the smaller pieces--do that. Like press secretary, like president. The Bush tax cut is literally class warfare by numbers.

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