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How the GOP Became the Party of the Rich

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The Republican mania for rewarding the rich with tax cuts has become so warped that the normal rules of budgeting no longer seem to apply. Arguing for an extension of the Bush tax cuts, Sen. Kyl spelled out what could well serve as the Party of the Rich's credo: "You should never have to offset the cost of a deliberate decision to reduce tax rates on Americans." The same rule, of course, doesn't apply to spending for those in need: At the time he called for more borrowing on behalf of the rich, Kyl was also fighting to deny unemployment benefits to 5 million Americans. "Continuing to pay people unemployment compensation," he scoffed, "is a disincentive for them to seek new work."

 

In retrospect, the true victor of the midterm elections last year was not the Tea Party, or even Speaker of the House John Boehner. It was Grover Norquist.

"What has happened over the last two years is that Grover now has soldiers in the field," says Bartlett, the architect of the Reagan tax cuts. "These Tea Party people, in effect, take their orders from him." Indeed, a record 98 percent of House Republicans have now signed Norquist's anti-tax pledge – which includes a second, little-known provision that played a key role in the debt-ceiling debacle. In addition to vowing not to raise taxes, politicians who sign the pledge promise to use any revenue generated by ending a tax subsidy to immediately finance – that's right – more tax cuts.

Norquist insists the measure is necessary to force Congress to rein in spending. "I'm not focused on the deficit," he says. "The metric that matters is keeping spending down." But in the real world, the effect of Norquist's oath is to prevent the government from cutting the deficit by ending tax breaks to the rich. All told, tax breaks cost the government $1.2 trillion each year – far more than defense spending ($744 billion), Medicare and Medicaid ($719 billion) or Social Security ($701 billion). And most of the breaks – think of them as government subsidies delivered through the tax code – go to the wealthy. The richest one percent of Americans receive a 13.5 percent boost in their incomes from such subsidies – almost double the benefit the bottom 80 percent receives. Under Norquist's pledge, lawmakers are forbidden from ending any kind of tax break – mortgage deductions for luxury vacation homes, subsidies for giant oil companies, lower tax rates for private-equity millionaires – without using the money to pay for another tax cut. "If you can't get rid of tax expenditures – if old Grover is going to call that a 'tax increase' – it's not just ludicrous, it's deception," says Simpson, the former GOP senator.

Ludicrous or not, Norquist's intransigence on tax expenditures killed the "grand bargain" that President Obama proposed during the debt-ceiling standoff. In return for $1 trillion in cuts to social spending and national security, plus another $650 billion in reductions to entitlements like Medicare, Obama asked Republicans to get rid of $1.2 trillion in wasteful tax subsidies. "Democrats weren't talking about raising taxes – they were talking about eliminating tax expenditures, for God's sakes!" says Voinovich. "Many of them should have been eliminated a long time ago." But with so many Republicans committed to Norquist's anti-revenue pledge, Boehner was forced to walk away from the deal.

"Grover's got 'em terrified," says Simpson. "I always tell Republicans, 'Hell, Grover can't kill ya. He can't burn down your house. The only thing he can do to you is defeat you in re-election – and if re-election means more to you than your country, then you shouldn't be in the legislature.'"

The battle over the debt ceiling underscores the GOP's rapid evolution into the Party of the Rich. The budget savings projected from the compromise that Republicans wound up agreeing to – $2.1 trillion – won't even begin to pay for costs incurred by the Bush tax cuts. In their first decade alone, the cuts wound up depriving the Treasury of $2.5 trillion – with 38 percent of the money now going to the richest one percent of Americans. For all their talk of cutting the deficit in recent years, Republicans have spent far more of the public's money to subsidize the wealthy.

Indeed, since Republicans began their tax-cut binge in 1997, they have succeeded in making the rich much richer. While the average income for the bottom 90 percent of taxpayers has remained basically flat over the past 15 years, those in the top 0.01 percent have seen their incomes more than double, to $36 million a year. Translated into wages, that means most Americans have received a raise of $1.50 an hour since the GOP began cutting taxes during the Gingrich era. The most elite sliver of American society, meanwhile, saw their pay soar by $10,000 an hour.

America became a great nation with a prosperous middle class on the strength of a progressive tax code – one that demands the most of those who benefit most from our society. But the Party of the Rich has succeeded in breaking the back of that ideal. Today, says Johnston, "the tax system ceases to be progressive when you get to the very top of the wealthiest one percent." Above that marker, the richer you get, the lower your relative tax burden. "We have moved toward a plutocracy," Warren Buffett warned in a recent interview. "As people have gotten richer and richer, they have been favored by taxation – and have gotten richer to a greater degree."

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