Tuesday, February 06, 2007

Bush's attack on the middle class

Bush's just proposed budget is an insult to the successful middle class. The successful middle class could be defined as those families who have worked to earn a reasonably comfortable lifestyle and have been prudent enough to save for their retirement. They are not rich. Depending on the area of the country they live in they could be viewed as upper middle class or as just smack in the middle class. They are the living example of what this country has stood for in the world. This is really what the "American dream" has long meant as opposed to the perverse view that seems to be taking place now which suggests that it is having $100 million in the bank. That could be called the "banana republic dream".

The Bush Administration budget seeks to perpetuate all tax cuts that have been enacted in his administration. It does not address in any way the Alternative Minimum Tax(AMT) and it raises medicare expenses. The AMT was originally approved to corral the wealthy who were paying little or no taxes through the use of trusts, non-taxable investments, and other means. Since it was never indexed to inflation and because of its inexplicable rules, it now affects millions, possibly over 20 million, of taxpayers and no longer touches the really wealthy. It is especially onerous in states with high tax rates and for families with children. The effect is to tax the "successful middle class" at a higher rate than the wealthy. This is unconscionable and it is well known. Both political parties have preferred to bury their heads in the sand on this issue in recent years, while both admit that it is bad tax legislation. The Democrats are now finally bringing the issue to the table and the Bushies readily admit that it is bad tax legislation. Their rationale for its exclusion from the budget is that they are putting a "patch" on it, which until this year is what Congress as a whole was comfortable with as well(a patch means a one year fix that only partially eliminates the problem in the year they are patching). The Bush budget is a 5 year plan, but they are excluding AMT because it has a one year partial fix outside of the budget. The truth is that they want the money and they see this bad rule as an annuity that they can continue to milk. Bush will leave it to the newly converted Democrats to fix the rule for good two years from now, and fill the gaping hole in tax revenue that it creates.

As for Medicare, Bush's bill will raise the Medicare payments for retirees with income over $80,000 a year. That $80,000 includes of course social security benefits, retirement plans, and 401K plan drawdowns, the money people have saved, all before tax. Like almost all government cost programs under either party, once in place it will never be indexed so the economic impact will dig deeper into the middle class every year. $80,000 may sound like a lot today, but see if that still rings true ten years from now. And even today, the elderly at that level who live in major cities with high tax rates and high apartment costs are far, very far, from being well-to-do. The idea of raising rates for some may be sound, or necessary, but the threshold should be much higher.

There are solid theoretical and practical arguments that can be made for both higher or lower tax rates, more progressive or less progressive tax rates, and the possible benefits of a greatly simplified tax code. This post is not about that. It is about a Bush budget that perpetuates an assault on the middle and upper middle class and that has no basis in logic or fairness. And it is about Bush putting in place additional costs for health care at a threshold that could over time be severely punitive to the middle class.

It is difficult not to be disheartened by this cynical and politicized administration. The sugarless icing on the cake last night was listening to the Democrat's designated responder, Senator Kent Conrad, already have his PR scripted buzz words in place so that as he made some adequate points about the proposed budget he repeatedly said it's a budget of "deception and debt deception and debt deception and debt". It would be refreshing if the Democratic Party would follow Barack Obama's lead and start speaking in English.

2 Comments:

Blogger aj said...

concise and right on!

1:17 AM  
Anonymous Anonymous said...

Good comments, but I hope that you're not suggesting that Obama is the answer.

2:51 PM  

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