Taxes for an Ownership Society

[Guest guest]

http://www.nytimes.com/2004/09/15/opinion/15wed1.html?th

 

September 15, 2004

 

Taxes for an Ownership Society

 

When President Bush talks about an " ownership society, " hold on to

your wallet. The slogan, like " compassionate conservative " before it,

is sufficiently vague to mean many things to many people, and the few

details that Mr. Bush has provided - bolstered home ownership and new

tax-sheltered savings plans - seem innocuous enough. But in tax terms,

" ownership society " means only one thing: the further reduction, if

not the elimination, of taxes on savings and investments, including

taxes on dividends and on capital gains on stocks, bonds and real

estate. That, in turn, means - by definition - a shift in the tax

burden onto wages and salary - or, put more simply, a wage tax.

 

The regressive results would be appalling. The richest 1 percent of

Americans earn just about one-tenth of total wages and salary, but

almost half of all income from savings and investments - income that

would be largely, perhaps entirely, untaxed in an " ownership society. "

In contrast, taxable wages and salary make up almost all of the income

of most Americans.

 

The Bush camp has been floating the idea that what the president is

getting at is a consumption tax. But the administration is not talking

about a true consumption tax, which would apply to spending regardless

of where the money comes from - from your paycheck, cashing in your

stocks and bonds, selling your house, or borrowing. It is, in effect,

talking about a tax on wages.

 

Properly understood, a consumption tax is intended to increase

national savings by making it relatively more attractive to save than

to spend. The main argument against it is that it hits hardest at

low-income and middle-income families, who tend to spend most of what

they earn. But as Peter Orszag, an economist at the Brookings

Institution, pointed out in a recent speech at Georgetown University,

Mr. Bush's de facto wage tax would be the worst of all worlds: it

would have all the regressive aspects of a consumption tax and none of

its potential for increasing national savings.

 

When Mr. Bush talks about new tax-favored savings accounts, he never

mentions that most people don't even take advantage of existing plans.

They won't be turned into owners by new tax breaks for interest,

dividends and capital gains. To turn Americans into owners requires a

strong economy in which the people who work for a living share in the

benefits of economic growth.

 

A good place to start would be to tackle the obstacles to sustained

growth that currently exist, like spiraling health care costs,

dependence on foreign oil and the administration's mania for

unaffordable tax cuts - in short, to reverse, not intensify, the

trends in the current economy.

 

In the past nearly three years of economic recovery, the distribution

of economic growth has become more skewed than at any other time in

modern memory. Currently, 47 percent of growth is flowing to corporate

profits, by far the largest share during any of the other eight

post-World War II recoveries. Fifteen percent goes to wages and

salary, the smallest share of economic growth in more than 50 years.

To make matters worse, the share of compensation that is devoted to

health and pension benefits is far larger during this recovery than

any other, representing a further squeeze on the wages and salaries of

ordinary Americans. In 2004, take-home pay as a share of the economy

dropped to its lowest level since the government started keeping

records in 1929.

 

All of this would make the drive for a wage tax laughable, if only it

were a joke. And yet, when he says " ownership society, " a wage tax is

exactly what Mr. Bush is driving at.

 

Copyright 2004 The New York Times Company