GOP presidential candidate Tim Pawlenty observed the 10th anniversary of the Bush tax cuts by proposing $2 trillion in additional tax cuts, primarily for millionaires and global corporations.
The former Minnesota governor wants to eliminate the federal estate tax, the nation's only levy on inherited wealth. He wants to lower top tax rates on the rich from 35 to 25 percent. He wants to only tax income from work, not wealth — by eliminating all capital gains taxes.
This makes Tim Pawlenty a billionaire's dream candidate.
He sure knows how to mark an anniversary. The 2001 Bush tax cuts were a $2.5 trillion mistake that put us on the road to fiscal instability. At the time, Congressional budget analysts projected a $5.6 trillion surplus that supposedly would mount up over this past decade. An Economic Policy Institute report points out that the Bush tax cuts cost over $2.5 trillion over the last decade.
But even after the rosy projections turned to red ink, the tax cut bonanza continued. Congress engaged in a "decade of magical tax cut thinking," responding to each economic challenge with a one-point program: cut taxes for the wealthy and expand tax loopholes for global corporations. Pawlenty's absurd proposal is the latest articulation of the Republican Party's math-defying magical thinking.
Bob McIntyre, the director of Citizens for Tax Justice argued in 2001 that the tax cut was a bad idea — that it was overly tilted to benefit the rich — and would eventually lead to deficits. Last week, His organization released a report projecting that another 10-year extension of the Bush tax cuts would cost $5.5 trillion. Add in Pawlenty's tax program and we can look forward to $7.5 trillion more in red ink.
An Economic Policy Institute report points out that the Bush tax cuts cost over $2.5 trillion over the last decade. An estimated 38 percent of those tax cuts — almost $1 trillion — went to households in the richest 1 percent, those Americans with annual incomes that exceed $645,000. Pawlenty's proposals are probably even more regressive in terms of who benefits.
Recent IRS data reveals that the richest 400 U.S. taxpayers have seen their effective tax rates fall to their lowest levels since prior to the 1930s Great Depression. Their effective tax rate has fallen from 51.2 percent in 1955 to 18.1 percent in 2008, the most recent year that we have data for. According to the Citizens for Tax Justice, Pawlenty's plan would cut taxes for this richest 400 by 73 percent.
There is some good news, however. The 10th anniversary of the Bush tax cuts has focused new attention on the irresponsibility of cutting taxes on the wealthiest Americans and corporations even more. Grassroots groups convened actions and press events around the country to dramatize the link between the tax cuts and local budget cuts that worsen unemployment.
Their message is getting louder and clearer: No more budget cuts until millionaires and corporate tax dodgers pay their fair share. Raising taxes on the rich has to be on the table going forward.
Activists are also coalescing around a number of revenue proposals that could raise trillions of dollars over the next decade. One initiative is the Fairness in Taxation Act, introduced by Rep. Jan Schakowsky (D-IL). Her legislation would add additional tax rates for millionaires and generate $74 billion a year. "Middle-class and low-income families didn't create these budget deficits or reap economic rewards over the last generation," Schakowsky wrote in a Chicago Tribune op-ed. "So our nation's plan to get our fiscal house in order should not sacrifice the vitality of our middle class and our commitments to address poverty."