The Tax Deal: A Fraud On The Workers, A Bonanza For the Rich

Published Dec 22, 2010 11:58 PM

Based on a talk given by Fred Goldstein to a Workers World Party forum in New York on Dec. 17.

I want to address the question of the tax deal that was just cut in Congress. It’s a big fraud on the workers of this country, carried out by a whole layer of capitalist politicians who are demagogic to the 10th power.

This bill was sold as a tradeoff. The politicians will give the rich some money for two years through tax benefits, but in return, they said, they would give a lot of money to the workers, plus it will create jobs.

Neither thing is true. It’s not going to solve the economic crisis by a long shot. It’s not going to make a dent in the 15 million officially unemployed and the 30 million people — probably more — who are unemployed and underemployed.

What the workers are going to get is nothing but a pittance in return for this huge gift to the rich and the super-rich. Furthermore, millions of workers are going to lose money from this tax deal.

What this bill shows is the strengthening of the ruling class and its command over society. And it has widened the chasm between the rich and the poor. Everybody decries this trend and says how horrible it is, but this move has widened the chasm.

What the workers got and what the rich got is worth going over, at least in the big details, though I am not an expert on this bill.

Every millionaire in this country got a tax cut, amounting to $137,000 per millionaire on the average. The top 2 percent of the rich altogether got $139 billion. The 6,600 very richest families in this country — out of a total of 65 to 70 million families — got $25 billion in income tax gifts. The 45,000 richest families, by avoiding estate taxes, also got between $25 billion and $50 billion — though there are discrepancies on this.

Attack on Social Security

What did the workers get? They were supposed to get a “tax holiday.” That was the big thing — getting a payroll tax holiday.

What does that mean? When you get your paycheck, it has all the deductions on it: federal tax, state tax, city tax and Social Security and Medicare.

Since the Roosevelt administration, workers have paid a fixed amount of their gross income to the Social Security fund for their retirement and the retirement of workers in the future. Right now that percentage is 6.2 percent. Until this tax deal the Social Security deduction was inviolable — no one could change it.

Social Security is supposed to be taken out of workers’ paychecks every week, every month — whenever they get paid — to finance the Social Security fund. The so-called “tax holiday” reduces the workers’ contribution to the Social Security fund by 2 percent. This is an attack on the inviolability of Social Security. It’s not supposed to be taken down, even for a year. It opens the door to reducing it further or even eliminating it. It’s supposed to be ironclad.

The Social Security fund comes from wages that get contributed to the social wage of the proletariat. The Republicans and plenty of Democrats want to get rid of it or reduce it. This move is a foot in the door. The Social Security fund is going to lose $114 billion this year because of it. You can see that Social Security is not a payroll tax. This is not a reduction in workers’ taxes. This is just the capitalist politicians taking money out of the fund that the workers are going to need when they retire. So it’s a fraud to say it’s a payroll tax holiday.

51 million low-paid workers get tax increase

What else did the workers get? Well, because of the great “payroll tax holiday,” President Barack Obama agreed to remove a tax credit that he had instituted in 2009 as part of the Recovery Act. And this is worth paying attention to. It was called the Making Work Pay tax credit.

With this tax credit, all workers who earned under a certain income — $75,000 for an individual — got up to a $400 tax credit. They just paid $400 less in taxes. A couple who made up to $150,000 paid $800 less in taxes. Just take that $800 and put it in your pocket. The Republicans proposed the “payroll tax holiday” in return for removing the Making Work Pay tax credit for the workers.

How does this work out? You’ve got to do a little bit of math. If you make $10,000 a year and your Social Security deduction is reduced by 2 percent, this saves you $200. But you will be losing the $400 you would have received under the MWP credit, which has been discontinued. So your taxes actually go up by $200.

If you make $15,000, you take $300 off your Social Security, but you loose the $400 MWP credit, so your taxes go up by $100.

If you’re a working couple making $30,000, instead of the tax credit of $800 you would have gotten in 2009, you wind up with $600. So you lose $200.

It’s a scam on the poor and the oppressed — especially Blacks, Latinos/as, women — the lowest paid in the country. And it encompasses millions of workers. There are various estimates of how many workers this affects and how many will lose money from the tax deal. One authoritative study has come from the Tax Policy Center of the Urban Institute and the Brookings Institute. It shows that 51 million families will lose money from this tax bill and have an average annual tax increase of $210.

The workers don’t know what happened behind closed doors when Obama agreed to a Republican “payroll tax” proposal.

So, after it’s all over, the rich walk away with the bank. And the workers will get a pittance, if anything.

The workers did get supplementary unemployment insurance extended for 13 months. That’s a desperately needed benefit which was held hostage in the negotiations. Anyone whose state benefits have been exhausted can apply for federal benefits. But the bill didn’t do anything for the 99ers, who have no more benefits after 99 weeks of unemployment. And the number of 99ers is going to increase. Once you’re out of a job for 99 weeks, the chances of getting back in are very, very limited.

This was called a jobs program. Why did Obama do this? Because they sold him a bill of goods: This is going to create jobs; it’s a new stimulus package. The bankers, the rich who want to get their money, told him this is going to create jobs. And he’s thinking of the elections in 2012. He’s desperate. The unemployment rate — 9.8 percent — won’t budge! Nothing makes it budge. He probably feels that’s why the Democrats lost their majority. And he’s looking at the next election and saying, “I’ll do anything just to get jobs going. So some people got unemployment insurance and everybody got the Social Security ‘holiday.’ Those will put money in some people’s pockets. Of course, the rich get their money. But at least we’ll get elected in 2012.” That’s how politicians think.

But you know what? It’s not going to work out that way. The bosses are already sitting on $2 trillion which they refuse to invest because they see no profit in it. And whatever stimulus comes from this bill, it will be a pittance, and won’t make a dent in the 30 million people or more who are already unemployed or underemployed, let alone the 1.2 million new workers who are going to join the workforce next year.

Maybe some jobs will come. Maybe there’ll be a little growth in the economy. This is possible. But it’s not going to change the conditions of the millions and millions of workers who are not going to get jobs.

The only way workers are going to get jobs is when they stop watching bourgeois politicians from both capitalist parties debate the fate of the proletariat and take matters into their own hands by opening up a struggle against capitalism.
Articles copyright 1995-2010 Workers World. Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.