Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, March 9, 1990 TAG: 9003091644
SECTION: NATIONAL/INTERNATIONAL PAGE: A4 EDITION: METRO
SOURCE: The Washington Post
DATELINE: WASHINGTON LENGTH: Medium
House Democrats immediately embraced the Citizens for Tax Justice report as a powerful argument for opposing President Bush's proposal to cut the capital gains tax, but they couldn't quite bring themselves to the point of endorsing higher taxes on the rich.
The study, the latest entry in a running debate over the relative fairness of the nation's tax system, said increasingly regressive tax laws are the root cause of the stubbornly high federal budget deficit.
The tax debate is serving as a prelude to the upcoming congressional battle over the level of taxation for capital gains. The argument began with a similar study by the House Ways and Means Committee, which was rebutted by a Bush administration analysis that argued the wealthiest 20 percent of all Americans are paying a larger share of overall taxes than they used to: 58.1 percent of the total now, compared with 55.7 percent 10 years ago.
The Tax Justice analysis took a different tack, arguing not only that changes in the nation's tax system over the past 13 years are bleeding off $67.5 billion a year in lost revenue but that the wealthiest U.S. taxpayers are also the main beneficiaries.
The study argues that nine out of 10 American families now pay more in federal taxes - $25.6 billion in 1990 - than they would have if the tax system had not been changed since 1978.
The wealthiest 10 percent of taxpayers, by contrast, are paying $93.1 billion less in taxes this year than they would have under the pre-1978 tax system, the study said. The net loss: $67.5 billion.
The result, said Citizens for Tax Justice director Robert S. McIntyre, is a continued high federal budget deficit. "The federal deficit can be traced, in total, to huge tax breaks granted to the most wealthy Americans over the past decade and a half," concludes the group's study. "These people have watched their incomes and wealth grow by leaps and bounds. . . . They are the folks to whom the bill should be sent."
Led by House Majority Leader Richard A. Gephardt, D-Mo., Democrats argued that the fiscal policies followed by Presidents Reagan and Bush have provided huge benefits to the wealthy while shortchanging working Americans.
"We have had a massive rip-off on the part of the wealthiest 1 percent of people in this society and the middle class is stuck with the bill," said Rep. David R. Obey, D-Wis.
But the Democrats, mindful of political damage their party has suffered after advocating higher taxes, became relatively tongue-tied when asked if the next logical step to their argument wasn't to raise taxes.
"We're not endorsing tax increases," said Gephardt, who led House Democrats in an unsuccessful effort last year to beat the capital gains tax cut with a proposal that included raising the income taxes of the most wealthy taxpayers. "The Democratic Party is not for raising taxes on the working people."
McIntyre said the study also showed that pre-tax income for the wealthiest 1 percent of taxpayers had risen by 86 percent since 1977, adjusted for inflation, while the poorest 20 percent had seen their pre-tax income decline by 14 percent.
The study proposed a number of tax changes to make the system more progressive, including higher taxes on high-income individuals and corporations.
by CNB