Tax Reform Just Start Of Economy Upheaval

by Geov Parrish

Democrats objected (a bit) to the size of the cuts, resulting in Dubya's generous early "compromise" of knocking off about $300 billion. But they generally didn't even mention the plan's fundamental structure, which overwhelmingly benefits the richest one percent of Americans. It's no surprise. Expecting "moderate" millionaires to stick up for us regular taxpayers when our two corporate parties square off is rather like, when the Mariners play the Twins, expecting the Twins to oppose baseball.

And, so, we've now stimulated the economic growth in retail yacht sales. But according to an interview with a senior Bush cabinet member, Treasury Secretary Paul O'Neill, the tax cuts were just the beginning of the Dubya Administration's vision to radically remake the American economic landscape by funnelling our wealth to the pointlessly wealthy.

The O'Neill interview, an account of which was published May 18 in London's Financial Times, lays out in some detail O'Neill's desire to, among other things, privatize and rework Social Security and Medicare; eliminate the capital gains tax on businesses; and, most alarmingly, abolish the corporate income tax. O'Neill implied, but did not directly say, that Bush himself was "intrigued" with the ideas.

While O'Neill cited his philosophical desire to abolish the corporate income tax during his confirmation hearings in January -- after which he was overwhelmingly confirmed -- his comments to a foreign newspaper were the first time a ranking Bushite has laid it out as a specific goal.

O'Neill acknowledged that abolishing the corporate income tax would probably mean both lower government spending and higher personal income tax rates. The corporate income tax now comprises 10 percent of the federal budget (down from about 25 percent in the 1950s). While tax cuts for wealthy individuals, such as efforts to rip away at the capital gains tax, have been visible and often contested, the tax code changes that have reduced corporate taxpaying have been quiet, bipartisan affairs. Perhaps the most important came late in the Reagan era: The Tax Reform Act of 1986. It popularized something called an "S Corporation," a vehicle by which corporations could channel profits directly to individuals, avoiding corporate tax rates and enabling the individuals to pay lower rates and use deductions unavailable to companies. Needless to say, most of the public, while paying more and more, was and is clueless about such corporate policy machinations, a trend O'Neill obviously feels can be continued without much fuss or undue political cost.

O'Neill, like many conservatives, argues that the corporate income tax is really a personal tax, as corporations simply pass the cost through to consumers. This is horse hockey, as any economist (or grocery shopper) knows. Companies price their products not based on overhead and production costs, but on how much the market will bear. Just ask Microsoft, or a military contractor, or the pharmaceutical industry. Or any drug dealer. You and I are far more accountable than a legal fiction is; individuals, when we profit from providing a service or good, should have more rights and less tax liability than a corporation -- not vice versa.

On those rare occasions when elected representatives object to further structural fleecing of the public, Bushites tend to sneer that the complaintants are engaging in "class war." They're not, of course; they're observing that the Bush Administration is waging, and winning, a class war. The actual impact of an abolition of the corporate income tax, in combination with the various tax cut plans over the last 20 years, is to shift the burden of funding government services away from those who benefit the most, toward those who can afford it the least. In further combination with the cuts in services to the poor, working, and middle classes (corporate welfare continues to burgeon), the very function of government is being redefined before our eyes. It is becoming an elaborate wealth transfer scheme, by which the labor and assets of the country's "lower 99 percent" are forcibly stolen and given to America's economic elites.

O'Neill's comments -- coming at exactly the time the Dubya tax cut was being considered by Congress -- reveal the full extent to which the Bush radicals want to rewrite the rules. But, remarkably, US media almost completely ignored the Financial Times story. Only the Washington Post -- which specializes in reporting Beltway arcana for the edification of insiders -- carried an account, two days later, devoted to the London story. The foreign interview seemed designed to alert financial and political players as to the Bush intent, while keeping the public in the dark. Neither the Financial Times nor the Post, of course, challenged the obvious fallacy of O'Neill's "pass-through" argument, or mentioned the enormous expansion of the already record gap between rich and poor that would result.

Is abolishing the corporate income tax just a wild O'Neill pipe dream? Perhaps. O'Neill's vision is essentially the corporate equivalent of Dr. Strangelove, obsessively destroying the world for the greater glory of, in this case, money. But the military equivalent of Dr. Strangelove, Donald Rumsfield, is busy requisitioning all of his fantasies over at the Pentagon. The odds that such terrifying "reforms" could become law are far better than they seemed in January, when the Senate, at its confirmation hearing, submissively gave O'Neill's vicious visions a nice pat on the head.

Now, our media are content to ignore O'Neill's big picture, and Democrats have put up no genuine opposition to a tax cut plan that does exactly what O'Neill, on a far grander scale, is envisioning: making the wealthy much, much wealthier, at our expense. Once again, the opposition, if there is to be any, must come from us.