Published on Monday, May 21, 2001
Honesty, Tax Policy and Society
by Seth Sandronsky
Want honesty from one member of the Bush administration about America’s
federal tax policy? Then listen to Treasury Secretary Paul O’Neill.
O’Neill can’t be accused of putting people to sleep by talking left and moving right as President Clinton did convincingly on a regular basis. In a recent interview with the Financial Times, O’Neill called current U.S. tax policy “an abomination,” the “very structure” of which must be changed.
As Bob Dylan sang, “look out kids.”
One change that the Treasury Secretary, a former CEO of Alcoa, supports is the elimination of corporate income tax. This would increase the competitiveness of U.S. corporations and spur growth, he said.
Income taxes on corporations comprise approximately 10 percent of all U.S. government revenues.
O’Neill’s view of the corporate income tax as a drag on business growth neatly sidesteps the factor of excess capacity in the global economy. It features a glut of products, from cars to coffee and computers, that consumers can’t afford to buy.
It would be most revealing to hear a journalist ask O’Neill why a corporation would invest its tax savings to become more competitive by expanding agricultural or industrial production when the global economy has a glut of unsold goods. We might be waiting a spell for a member of America’s mainstream news to put this question to him.
The Treasury Secretary also said in the Financial Times interview that he wants to eliminate business’ capital gains tax. This policy proposal reflects the rising role of Wall Street finance in business activity.
O’Neill assumes that what’s good for Wall Street holds for Main Street as well. That is certainly the prevailing view, but it can change swiftly given the American economy’s increasing reliance on consumers and corporations spending more than their earnings, financed by record debt.
The late economist Hyman Minsky coined a term for this trend: financial fragility.
Which brings us to O’Neill’s view of public responsibility and the funding of the American people’s health care and retirement. To this end, he suggests major changes in two popular public programs: Medicare and Social Security.
Public responsibility for the infirm and retired should instead be replaced with personal responsibility. Some might call this a version of “tough love.”
According to O’Neill, "Able-bodied adults who have the ability to earn income have an obligation not to pass part of their own responsibility on to a broader population." This would, in the case of Social Security, effectively eliminate a person’s ability to retire as a wage worker.
Here O’Neill’s vision props up the larger claim that Social Security has big financial problems. Economist Dean Baker takes a different view of Social Security.
“According to the most recent [Social Security] trustees' report, the program can pay all scheduled benefits until the year 2037, with no changes whatsoever,” Baker notes. “Even after this date, the program would always be able to pay a larger real (inflation adjusted) benefit than an average retiree receives at present.”
In the meantime, Medicare’s ills in the main flow from America’s health care crisis.
Thank our corporate Democrats and Republicans for cutting Medicare funds and forcing seniors into HMOs that are loath to help the aged and infirm. To say nothing of Medicare’s non-funding of care in a long-term skilled nursing facility.
“Seattle” activism to protest, defend, and yes, expand Social Security and Medicare could certainly counter O’Neill’s vision of tax policy, expressed honestly in the Financial Times interview. In brief, the Treasury Secretary’s deal isn’t yet sealed.
On one hand, the economic class interests represented by O’Neill include the Republican House, basically a Republican Senate and corporate America. They understand what’s at stake.
On the other, large numbers of the American people must wake from their slumber and do likewise. Such activism could well herald the dawn of a more civilized society.
Seth Sandronsky <firstname.lastname@example.org> is an editor with Because People Matter, Sacramentos progressive newspaper.