January 10th, 2003
Dear Representative,
President Bush has, at long last, turned his attention to the economy and proposed an economic stimulus package. Some parts of it, like the extension of jobless benefits, are commendable. The centerpiece of it, however, is the elimination of taxes on dividends. This defies rational political logic, other than the simple logic of looking out for one’s class, in this case the class of the rich.
There will be many, many conservative pundits who will manfully take up their pens, and point out that the rich, as a class, pay a great deal of taxes, and we must not punish them for their success, etc, etc. George Will and Debra Saunders will do a lot of hand-wringing about the awful plight of the rich. I would like to point out a couple of things concerning class warfare in this country: one, as a general trend the rich have been getting richer, and the poor getting poorer, without any help from the government, thank you very much (look up the ratio between CEO pay and worker pay sometime). This is a well-documented phenomena dating back at least two decades, when Reagan’s social policies began to take effect. At the very least government need not accelerate that process.
Secondly, this dividend tax elimination is not really for the rich, but rather only for the benefit of the ultra-rich. It is true that we have arrived at a system in which the very bottom tier of the working class does not pay very much, but in fact there is a vast middle ground between the lightly-taxed underclass and anyone I can imagine who will benefit to any meaningful extent. And in that vast middle ground there are those of us who pay significant fractions of income to the government. Thousands of dollars. There is nothing in dividend tax elimination for any of us. I cannot think of a single friend, family member, or even acquaintance with any likelihood of obtaining benefit from the elimination of dividend taxation. True, many people have investment in the stock market, but mostly in 401(k) plans where the issues of taxation are decades in the future. So, no help for the middle class or the underclass here.
And guess what? It is the middle- and underclass that spend money that drives the economy. The rich can pledge to eat out every single meal, can purchase a new car every month, can load up their houses with expensive electronics, but truly, they can only do so much to drive an economy. No benefit to middle class, no improvement to the economy. In fact, as the state governors have begun to point out, Dubya’s stimulus plan is worse than no plan: it digs a deeper hole for states by making taxable incomes lower, which in turn drives down state income tax revenues. I probably don’t need to tell you that states, as a whole, are in the worst financial shape since World War II. Here in Oregon we are engaged in a vicious fight to preserve some slight semblance of services to the elderly, the mentally ill, and the working poor.
Please support the Democratic governors’ plan, released yesterday. It calls for financial aid to states, and job creation through infrastructure spending. Financial aid to the states will keep states from raising taxes (increased taxes will slow down recovery), and job creation will pump money into consumer spending, which is what is needed to bring back the economy.
Sincerely,
Kurt