Facing budget shortfalls in Arizona, a leading state senator announced that legislators were reviewing all state spending and that "nothing was sacred."
But the religious coalition Protecting Arizona's Families responded, "Is nothing truly sacred? What about state programs for the hungry, homeless, and mentally ill children? Do they stand on the same moral ground as subsidies for corporations? And why won't we consider raising taxes on the wealthy before we cut programs on the poor?"
Active Christians and other people of faith are accustomed to weighing in on the morality of public spending and budget choices. Much of our recent attention has been focused on how our tax dollars are being used to advance an imperial foreign policy.
But we should also be alarmed at the changes being legislated to reshape the way our government raises money through federal and local tax systems. Federal tax cuts in 2001, 2002, and 2003 have fueled massive deficits and blocked possibilities for spending on human needs. These tax cuts have "trickled down" to worsen state and local budget deficits, forcing deep cuts in spending on poverty,
health care, and education. Almost every state has been plunged into its worst budget crisis since World War II. According to the Center on Budget and Policy Priorities, states are facing budget gaps totaling $85 billion in the coming year.
As a result, localities have laid off teachers, firefighters, police officers, and social workers, closed libraries and health clinics, cut childcare, mental health services, public transit, and pollution control, raised public college tuition and reduced financial aid, and let schools, playgrounds, roads, and bridges go unrepaired. Oregon shortened its school year by three weeks. Thirty-four states have cut spending on Medicaid and the State Children's Health Insurance Program over the past two years, removing between 1.2 million and 1.6 million low-income people from health coverage, including an estimated 490,000 to 650,000 children. The list goes on.
Most state and local taxes are highly regressive, imposing a higher burden on the poor than the wealthy. According to the Citizens for Tax Justice, the average state and local tax rate for the bottom fifth of income earners is 11.4 percent, more than twice the rate paid by the richest 1 percent of taxpayers. In some states, such as Washington and Florida, the poorest fifth of taxpayers pay as much as 14 percent of their income; the wealthiest 1 percent pay less than 3.5 percent.
These states practice the opposite of the "preferential option for the poor." Some states - such as Alabama, Tennessee, and Virginia - tax food and basic needs at a higher rate than income from investments. State and local sales taxes on items such as food take a larger percentage of the income from the pockets of the poor, making the state systems more regressive.
In the gospel of Mark, Jesus watches as people contribute to the treasury. He observes that the widow "put in more than all the contributors to the treasury; for they all put in out of their surplus, but she, out of her poverty, put in all she owned, all she had to live on" (12:41-44). This distinction underlies the moral basis for a progressive tax system: Those with the greatest capacity to pay should pay a higher percentage. Ten percent of the income of a person with a $10,000 income cuts into their basic sustenance. Ten percent of the income of a person with a $1 million income does not.
THESE DIRE BUDGET straits are largely the result of political and moral choices. In addition to factors such as recession, war, and increased prescription drug spending, many states during the 1990s gave away massive tax breaks to corporations and the wealthy. Some states are reversing these tax giveaways, but most politicians are afraid to restore some of the tax cuts made in fat times. Rather than set aside adequate funds for the lean times, states have irrevocably returned these revenues to the political donor class.
Every state has been clobbered by federal tax policies. Each of the three federal tax cuts since 2001 has directly and indirectly chipped away at state revenue. At the same time, federal devolution policies and mandates have shifted responsibilities and costs to states for such big-ticket items as education testing, security, health care, and social welfare. In 2003, the federal government could have sent $100 billion to the states to help them forestall the most painful cuts. Instead, Congress passed $330 billion in tax cuts, 53 percent of which went to the wealthiest 1 percent of households - those with annual incomes over $337,000.
The Bush tax cuts of 2001-2003 have not been "cuts" for everyone: Most taxpayers are experiencing a tax shift in the form of fee increases for services, property tax hikes, and cuts in local services.
So how did we get into this situation? Why are state tax systems allowed to remain so regressive, with undue burdens on low-income taxpayers?
In part, there is a well-funded anti-tax, limited government movement that includes national organizations such as Americans for Tax Reform, Citizens for a Sound Economy, and a network of state and local limited-government policy and grassroots groups. Over several decades, they have succeeded in changing the terms of the debate and political climate on state and federal fiscal issues. As a result, most state legislators are afraid to raise taxes to face their budget deficits. Nor will the federal government provide meaningful aid to the states to enable them to overcome the budget shortfalls.
And according to some of the architects of the right-wing "shrink government" program, the state budget crisis is right on schedule. Their agenda could be characterized as "shrink, shift, and shaft."
SHRINK. The conservative movement has long had a goal of greatly shrinking government, essentially rolling back central elements of the New Deal and Great Society reforms, such as college loans, homeownership programs, public health insurance and pension programs, and programs that help the poor. Budget deficits force budget cuts and thwart new spending initiatives. Underlying this program is an ideology about the role of government that is deeply out of step with the majority of Americans. How else can we explain the rationale for further federal tax cuts while our annual deficit exceeds $500 billion?
In truth, they don't want to shrink all parts of government. These tax cutters want to dismantle government programs that foster social justice and broaden wealth and opportunity for all Americans. They also aim to weaken the elements of government that regulate corporations to protect workers, the environment, and community interests. Their vision of limited government could be characterized as a "watchtower" state - with our taxes paying only for military, police, fire, and property rights protection.
SHIFT. Central to the right-wing fiscal program is to shift the tax burden and weaken the progressive tax system. For three decades, the basic thrust of this agenda has been to cut taxes on wealth and capital gains and shift the burden of paying for government onto wage and consumption taxes. Hence the focus on tax cuts that primarily benefit the rich, such as repealing the federal estate tax and cutting dividend and capital gains taxes.
A second shift is to move tax and spending from federal government to states and towns. As noted earlier, local tax systems are much more regressive because of their dependence on broad-based consumption taxes. The irony of this was dramatized last summer when many parents received checks from the IRS for the expanded Child Tax Credit. But as some families received $400 per child, they simultaneously witnessed their services deteriorate, while local and state fees, sales taxes, and property taxes were increased to make up for the federal tax cuts.
THE SHAFT part of the program involves the myriad budget cuts and shifts eroding the quality of life for working people. But these tax cutters are counting on the public not to connect the dots between local service cuts and federal budget policies.
We can now look forward to a "permanent tax cut offensive," with a long list of additional tax cuts on the 2004 agenda, including new corporate giveaways and tax-free savings accounts. "You'll have a tax cut each year," said Grover Norquist of the Americans for Tax Reform, architect of the "shrink, shift, and shaft" strategy. "Our goal is to shrink government to the size where we can drown it in a bathtub."
THE GOOD NEWS is that coalitions are forming in many states to oppose budget cuts and advocate for progressive tax reforms. In Connecticut, the statewide children's advocacy group has advanced a proposal for a "millionaire's tax," an increase in the top income tax rate, and won support from Republican Gov. John Rowland. In California, health care advocates attempted last year to restore the highest tier of state income tax rates that would have raised hundreds of millions for children's health care. In Alabama, even though voters rejected a progressive tax reform initiative, a missing moral voice was brought into the debate.
At the national level, the Fair Taxes for All coalition is tooling up to fight future tax cuts and illustrate the connection between the federal tax breaks for multimillionaires and the deteriorating quality of life at the local level.
Beyond broad taxation, the moral justification for taxing great wealth at higher rates, and imposing an inheritance tax, is that the wealthy have benefited disproportionately from the defense of property and the fertile ground created by public investment for private wealth. In the words of Bill Gates Sr., it is a "payback to society, the price of building and protecting wealth in the United States."
At stake is the question of what kind of society we want to become. Do we want to dismantle the ladder of opportunity we have attempted to build over the last half century? Do we want to further polarize our country along the lines of wealth and power? Ultimately, defense of a progressive revenue tax system must be linked to a broader moral framework and a vision of the kind of communities and society we want to have.
Chuck Collins was associate director of United for a Fair Economy and co-author, with Bill Gates Sr., of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes (Beacon, 2003) when this article appeared.
Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich-And Cheat Everybody Else, by David Cay Johnston (Portfolio, 2003)
"Upper Brackets: The Right's Tax Cut Boosters," a report on the conservative anti-tax movement by People for the American Way (www.pfaw.org, search: "upper brackets")
TAKE ACTION FOR FAIR TAXES
Pass resolutions. Get your congregation, social action committee, community organization, and local government to pass a resolution urging federal representatives to reverse tax cuts for multimillionaires and send aid to states and cities. United for a Fair Economy is coordinating a national resolution campaign. For information, sample resolutions, and a list of participating congregations and municipalities, go to www.faireconomy.org/resolution or call toll free (877) JOIN-UFE x26 for an organizing kit.
Join the national Fair Taxes for All coalition. See www.fairtaxesforall.org. Join with more than 350 organizations around the country to oppose permanent tax cuts and stop additional tax giveaways to corporations and the wealthy.
Preserve the Estate Tax. Join the effort to stop repeal of our nation's most progressive levy, the estate tax. You can personally sign the "Call to Preserve the Estate Tax" and get plugged into Responsible Wealth's informal advocacy network at www.responsiblewealth.org.