Republicans’ role reversal over whether to extend the interim payroll tax cut another year for 160 million American workers and their families couldn’t be more vivid. Republican lawmakers are insisting that the modest temporary tax cut, which provides an extra $1,000 to the typical family with a household income of $50,000, must be paid for by spending cuts if it is to be extended. In fact, many say it shouldn’t be extended at all because of the cost.
That is directly the reverse of their argument for extending the high-end Bush tax cuts for the nation’s wealthiest 2 percent, which are due to expire next year. Republicans uniformly argue that letting those high-end tax cuts expire would amount to a tax increase that would hurt the economy by taking away revenue flow and by punishing “job creators.”
Those high-end tax cuts on capital gains and other income, of course, mostly benefit the very wealthiest Americans, the top one-tenth of the top 1 percent. Their annual multimillion-dollar after-tax incomes, adjusted for inflation, soared by 400 percent between 1979 and 2005. By contrast, ordinary Americans’ inflation-adjusted incomes in the same period rose just 21 percent, a figure that trailed inflation for energy, health care and food.
The vivid contrast in their position — falling on their swords to continue tax cuts for the rich but not for ordinary Americans — has Republicans on the horn of a dilemma. Democrats do propose to pay for extension of the payroll tax cut by imposing a 3.25 percent tax surcharge on annual incomes above $1 million. That figure easily excludes the purported small business owners and “job creators” who Republicans are fond of saying they are protecting.
In truth, studies show that the nation’s megamillionaires and billionaires, who take fully 48 percent of the Bush capital gains tax breaks and whose taxes on incomes are usually lower than their secretaries, are rarely small business owners, job creators or industrial innovators. Many are Wall Street and financial industry honchos or corporate executives who often reap lavish multimillion-dollar bonuses and stock options by cutting workers, freezing salaries and benefits, and offshoring jobs.