The middle class deserves a new tax cut – the top 2 percent doesn’t

The tax cuts passed during the Bush administration — which, according to economists, included an unsustainable giveaway to the top income bracket — are going to expire Dec. 31. It’s important to understand that the rates we have now are a temporary change from the long-established status quo and were never meant to be permanent. For all the talk of “extending” tax cuts for one group or another, the debate in Congress really centers on whether to pass a new tax cut. For the middle class, the answer should be yes. For the richest 2 percent of the country, which has already benefited from government policies throughout the economic downturn, the answer should be no.

Republicans tell us there are two choices: slash taxes across the board, or watch our rates skyrocket to horrific levels. This is dishonest. There’s no reason we can’t cut taxes for the middle class and allow the unsustainable cut for the wealthiest 2 percent of earners to expire exactly as it was designed to do. This would pay down $700 billion in government debt over the next 10 years, according to the nonpartisan Congressional Budget Office. Lawmakers who say their top concern is reducing the debt should explain why they’d prefer a massive and fiscally irresponsible tax break for the richest 2 percent of Americans.

{mosads}Another giveaway to the wealthiest families in the country is not what we need right now. Supply-side economics — the discredited theory that upper-income tax cuts are the best cure for every fiscal problem — has led to the worst income disparity between the middle class and the richest Americans in about a century. According to a Nov. 3 analysis by the Economic Policy Institute, “Between 1979 and 2005, households at the bottom fifth of the income scale have seen an average, inflation-adjusted income growth of just $200 . . . over the entire 26-year period. By contrast, a small number of households at the top 0.1 percent of the income scale saw average income growth of almost $6 million over that same period.”

Just 3 percent of people who earn business income pay taxes in either of the top two brackets, according to the bipartisan Joint Committee on Taxation. Conservatives glide right past this by arguing that 750,000 of what they define as “small businesses” will be affected if the tax cuts for the rich expire. But that 750,000 includes Bechtel Corporation, the largest engineering firm in the country with gross revenue in 2008 of $31.4 billion. It also includes the auditing firm PricewaterhouseCoopers, which has operations in more than 150 countries. It’s unfortunate, and a bit silly, that Republicans consider these “small businesses” for the purpose of continuing our unsustainably low tax rate on the richest sliver of the country.

Would giving that richest sliver even more money really create jobs? If things worked that way, the Bush tax scheme would have given us the strongest economy we’ve ever seen. Instead, only 4.7 million private sector jobs were created between 2001, when Bush pushed through the first of his two massive tax cut packages, and the beginning of the recession in 2007. Compare that to the 18.2 million private-sector jobs created in the six years after Clinton-era tax increases were enacted in 1993, and we see how realistic the Republicans’ theories really are.

The best course of action now is both simple and straightforward: pass a new tax cut for the middle class, and return the top tax rate to the Clinton-era level where it helped the economy expand for so many years. This isn’t a debate about whether to increase or decrease taxes across the board, it’s a debate about who should really benefit the most from government policy: the middle class or the very top of the income scale. Throughout our history, we’ve tried both approaches and the results speak for themselves. The middle class deserves a break in this tough economy. Let’s not hold millions of hard-working families hostage to the demands of conservatives whose actions put the wealthy ahead of everyone else, whatever they might say.

Rep. Raúl M. Grijalva is co-chair of the 
Congressional Progressive Caucus.