Friday, October 24, 2008

Redistributing To The Rich

Redistributing To The Rich

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Seizing on comments Sen. Barack Obama (D-IL) made to "Joe the Plumber," Sen. John McCain (R-AZ) campaign has argued that Obama's economic policies would redistribute the wealth of hard working Americans and provide "just another government giveaway to others." "The redistribution of wealth is the last thing America needs right now. The goal is not to redistribute wealth, but to create it," McCain said during an event in Manchester, NH. But as the Tax Policy Center points out, "today's tax code is riddled with examples of government 'taking' money from one taxpayer and giving it to another." "[F]or decades, government has used the tax code for much more than raising money. These days, redistributing tax revenues are the principal way government encourages people to do what it wants and discourages them from doing what it doesn't," TPC wrote. In fact, during the last eight years, President Bush's regressive economic policies have effectively redistributed the nation's wealth to the richest Americans. According to a recent report released by the Organization for Economic Cooperation and Development (OECD), "the United States has the highest inequality and poverty in the OECD after Mexico and Turkey, and the gap has increased rapidly since 2000." Unfortunately, McCain's proposed economic policies would give even more wealth to the richest Americans, exacerbate the nation's income inequality, and further erode opportunities for social mobility.

BUSH REDISTRIBUTED TO THE WEALTHY: An analysis by the Center for American Progress Action Fund shows that President Bush's economic policies have "redistributed wealth to the richest Americansnearly twice the rate cut for those in the middle of the income spectrum." Meanwhile, the administration's failure to raise the minimum wage coupled with its poor enforcement of federal wage and hour laws, trade agreements, and union rights further undermined the economic security of middle and lower-income Americans. Data prepared by the IRS from tax returns filed during the post-9/11 recovery (2002 to 2006) reveals that household income grew by $863 billion during the period. "The 15,000 families at the top of the income scale saw their annual incomes go from about $15 million a year to nearly $30 million," accounting for more than 25 percent of all of the growth in income for the entire country. The remaining 1.7 million families in the top 1 percent of households accounted for nearly another 50 percent. But while the "top 10 percent of families accounted for 95.3 percent of the nation's income growthto a little less than $30,700." and left the majority with stagnating wages and declining household incomes." Looking at the effects of the first three Bush tax cuts, the Congressional Budget Office concluded that "the percentage by which the effective tax rate was cut for high-income families was between 2002 and 2006," the average real income for families in the bottom 90 percent of households increased by about $300

MCCAIN WOULD DOUBLE DOWN: McCain claims that "in this country, we believe in spreading opportunity." But his Bush-like economic policies would only further America's income inequality. In fact, by extending Bush's tax cuts to the wealthy and proposing $175 billion in tax breaks to America's largest corporations, McCain's regressive economic agenda would redistribute wealth to the richest Americans during a period of stagnating wages and growing economic anxiety. The bottom 60 percent of taxpayers would see only 12 percent of the benefit from McCain's plan to extend Bush's tax cuts, while over 100 million middle class households would receive nothing from McCain's proposal. Moreover, even though corporate profits increased by an estimated 66 percent between 2000 and 2006, McCain's plan to slash the corporate tax rate to 25 percent from 35 percent would give even more benefits to America's richest corporations. According to a Center for American Progress Action Fund analysis of McCain's plan, the 200 largest companies stand to gain $45 billion a year from McCain's proposal. Highly profitable industries like energy companies and merchandising and retailing companies would receive billions from additional tax breaks.

MOBILITY THREATENED: America's income concentration is at its highest level since 1928. According to the OECD report, "the richest 10 percent earn an average of US$93,000 -- the highest level in the OECD. The poorest 10 percent earn an average of US$5,800 -- about 20 percent lower than the OECD average." But income inequality is cause for even more concern than the simple numbers suggest, since it also has an effect on mobility. In fact, just "7 percent of children born to parents in the bottom wealth quintile make it to the top quintile in adulthood," and "36 percent of children born to parents in the bottom wealth quintile remain in the bottom as adults." As OECD Secretary General Angel Gurria has pointed out, "greater income inequality stifles upward mobility between generations, making it harder for talented and hard-working people to get the rewards they deserve."

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