Take From the Poor, Give to the Rich

The current Republican tax and entitlement packages deny help to 28 million working families. House Speaker Newt Gingrich scorns the suggestion that the child tax credit be extended to these hard-working families. “That’s welfare,” said the speaker. “President Clinton campaigned on middle-income tax relief. Now he wants to siphon part of that off and increase welfare spending.”

“Welfare” is a despised taunt in the Republican lexicon. In Sen. Phil Gramm’s metaphor, welfare is ladled on people who ride for free on the wagon that the rest of us pull. Welfare takes the hard-earned taxes of working people and lavishes them on Ronald Reagan’s dissolute “welfare queens.” Welfare saps the spirit and creates a culture of dependency, according to Speaker Gingrich. He could not think of a worse insult to hurl.

But Gingrich is talking about working parents struggling to get by on less than $30,000 a year in family income. These parents work at the hardest jobs that pay the least. They do pay taxes. In fact, they pay a higher percentage of their income in payroll taxes than Gingrich does. They take a bigger hit from regressive sales and excise taxes.

Most of them benefit from the earned income tax credit--Ronald Reagan’s favorite program designed to reward work rather than welfare. But now that Congress has repealed welfare, perhaps Gingrich feels less need to make work pay.

These low-income families have taken the worst beating in the global hiring hall. They were the first forced to compete with low-wage labor in the rush of “offshore” manufacturing. Their wages have been declining for two decades. Their jobs are less secure. Even in the current recovery, they still haven’t made up the income losses suffered in the last recession. A tax break is likely to offer the best raise that they can look forward to. Yet bizarrely, the Republican tax plan denies most of them any benefit from the child-care tax credits that go to middle- and upper-income families.

Ironically, the original “contract with America” promised to extend the child tax credit to low-wage families--what Gingrich now derides as welfare. But faced with budget limits and intent on rewarding the affluent people who pay for his party, the speaker has broken his own promise to low-income families.

The result is a tax and entitlement package that is truly obscene. After the cuts in taxes and entitlements kick in, families with fully 40% of America’s children are denied any tax relief because their income is too low, compared to 3% who are denied relief because their income is too high. The Republican “middle-class tax cut” turns out to be a carnival for the already wealthy. When all the tax breaks kick in, the nonpartisan Center on Budget and Policy Priorities estimates that the House bill touted by Gingrich will provide 87% of its benefits to the most affluent 20% of Americans. The wealthiest 1%--those with annual incomes above $300,000 for a family of three--will pocket a tax break worth about $27,000 a year. The 40 million families with the lowest incomes may actually lose ground, when the cuts in food stamps and Medicaid are factored in.

House Majority Leader Dick Armey has called the denial of relief to low-income families “non-negotiable.” Other causes take priority: tax shelters for the anxious heirs of the wealthiest families who must pay inheritance taxes, new breaks for the affluent pocketing gains from the soaring stock market, new loopholes for high-income families and corporations.

The fight against this outrage is just gearing up, but it will be an uphill battle. Politicians like to pass tax cuts before an election year. Republicans seem to believe if they give the president his education tax credits, they can do what they please with the rest of the bill. Many Democrats fear being left out to dry if the president folds.

Gingrich doesn’t try to defend a tax bill that lavishes benefits on the rich while providing no relief for much of the rest of the population. Instead he distorts the bill and derides his opponents as fixated on “redistribution” and class warfare. But he turns out to be the true class warrior, stalwart in defense of the overclass. For Gingrich, tax breaks for the wealthy are a “moral imperative,” while tax relief for low-income families are contemptible “welfare.” No wonder so many Americans hold the speaker in such deservedly high disregard.