Rarely in American history has a tax so effectively targeted the top one percent. "It took Republicans about four months to figure out how much they hated it," says McIntyre, president of Citizens for Tax Justice. Republican rage over the president's health care plan has far less to do with the size of government or the merits of the individual mandate than the blow to the investor class. If Obamacare remains in place and the Bush cuts for the wealthy expire as planned, top earners will be paying a tax of 23.8 percent on capital gains – more than they have at any time since Clinton cut the capital gains tax in 1997. Health care reform, griped The Wall Street Journal, was nothing but a "sneaky way" for Democrats to wage a "war on 'the rich.'"
A key element of the GOP's war on the poor was cemented by the surprise election of Scott Brown to replace Ted Kennedy in the Senate in January 2010. As a candidate, Brown had made his high-mileage GMC pickup truck the star of his campaign commercials. "I love this old truck," he said. "It's brought me closer to the people." But Brown's real allegiance was to his wealthy donors: the billionaire Koch brothers, who bankrolled the Tea Party, and the financial interests who made a last-minute investment of more than $450,000 to propel Brown into office.
As soon as he was sworn in, Brown set about hollowing out the so-called Volcker Rule, which was designed to bar big financial institutions from using their own money to make risky, speculative bets on the market. By agreeing to provide Democrats with the crucial 60th vote on finance reform, Brown secured an exemption from the trading ban for mutual funds and insurers – a move directly benefiting Massachusetts-based financial giants like Fidelity and MassMutual. Brown also insisted that the Wall Street giants who caused the financial collapse – banks like Goldman Sachs and JP Morgan Chase – be allowed to continue using taxpayer-subsidized capital to gamble on hedge funds and private-equity deals. Former Fed chair Paul Volcker was furious: "Allowing a bank to invest in a speculative fund," he said, "goes against the very intent of the bill."
But Brown wasn't done. At the 11th hour, he forced Democrats to spike a tax on big banks and hedge funds that was designed to generate $19 billion to pay for the costs of financial reform. As a result, consumers and small banks had to pick up the tab. Brown, meanwhile, was richly rewarded for his efforts on behalf of Wall Street: During a three-week period at the height of negotiations, he raked in $140,000 in campaign cash from big financial firms, including Fidelity and MassMutual, Goldman Sachs and JP Morgan.
When Republicans won back control of the House in last year's midterm elections, they followed Brown's lead and moved swiftly to betray their Tea Party backers by running up more deficits on behalf of the rich. Within days of the election, Republicans not only secured a two-year extension of the Bush tax cuts for the wealthy, they also enabled America's richest scions to inherit millions of dollars without paying a dime in taxes. All told, the GOP's two favors for the party's biggest donors were secured in a lame-duck bargain that adds another $858 billion to the debt – an amount greater than the original stimulus plan the Republicans opposed so bitterly.
First, the GOP filibustered a Democrat-led effort to extend the Bush tax cuts on only the first $250,000 of income. The party leadership's hard-line stance – supported by barely a third of all voters – turned $90 billion over to the wealthiest Americans. It also set a precedent for further extensions that would cost nearly $1 trillion over the next decade. At the same time, the GOP drove through a deal that actually raised taxes for couples who make less than $40,000 a year – and then turned much of the extra cash over to couples who earn more than $200,000. Obama agreed to this massive transfer of wealth in order to retain the Bush tax cuts for the middle class – but the only other significant thing he got in return was a one-year extension of jobless benefits for the long-term unemployed.
But even the GOP's big payday for the wealthy pales in comparison to the handout that Republicans secured by gutting the estate tax. With the expiration of the Bush tax cuts, the inheritance tax was set to snap back to its Clinton-era standard: exempting the first $1 million of all estates from taxation, and stepping up the tax rate on the wealthiest estates to 55 percent. Instead, Obama agreed to raise the exemption to $5 million and lower the top tax rate to 35 percent – an apparent horse trade demanded by the Senate's second-ranking Republican, Jon Kyl of Arizona, who then allowed the president's nuclear-stockpile treaty with Russia to move forward in the Senate.
Shockingly, the deal actually sweetened the bargain the super-rich had received in 2009, enabling the heirs to the richest 0.25 percent of estates to pocket an extra $23 billion they would have otherwise owed in taxes under Bush. In fact, under the terms Kyl demanded, the federal government will spend more to eliminate or cut taxes for 100,000 rich people than it will to extend unemployment benefits for 7 million Americans.
In a little-noticed detail, the two-year deal also created a loophole that allows the wealthiest couples to pass on $10 million to a child today – while they're still living – without paying a penny of tax. That means the rich can offload their wealth to their children before it increases in value – evading higher estate taxes in the future. "In the next two years," one tax attorney crowed to The Wall Street Journal, "wealthy people have an unprecedented opportunity to push a lot of the value of their assets out of the estate-tax system." According to tax historians, the new rules create the most generous tax environment for wealth transfers for the super-rich since 1931.
And that was just the beginning of the budget-busting handouts the GOP demanded for the rich. In April, Republicans in the House passed a budget that would have slashed income taxes on corporations and the wealthiest Americans to just 25 percent – a $3 trillion giveaway that would have been financed by doubling out-of-pocket expenses for future retirees on Medicare. Top Republicans like Cantor have also pushed for a replay of the American Jobs Creation Act – endorsing a new tax amnesty that would allow corporate giants like Apple and Pfizer to bring home $1.4 trillion in offshore profits that would be taxed at just 5.25 percent – a favor for the wealthy that would generate another $79 billion in deficits. "At the same time they're talking about these big deficit problems, running around saying, 'We're broke,' they're contemplating one of the most egregious tax giveaways in recent memory," says Greenstein of the Center on Budget and Policy Priorities. "The potential windfall gains are beyond enormous – and the lion's share would go to shareholders of these big corporations and their executives."
Never mind that the previous tax amnesty in 2004 created virtually no new jobs, as corporate executives eagerly pocketed the windfall for themselves: Republicans are once again claiming that the tax amnesty will enable corporations to spend their repatriated wealth putting Americans back to work. Mitt Romney, the GOP presidential front-runner, promises that the flood of corporate cash will generate "hundreds of thousands if not millions – of good, permanent, private-sector jobs." That flies in the face of basic economics, given that corporate America is already sitting on hundreds of billions in domestic cash reserves. What the tax amnesty would do, however, is boost stock prices. According to an analysis by JP Morgan, as much as two-thirds of the $1.4 trillion that would be brought back into the country would go to stock "buybacks and dividends" rather than "new factories, new jobs and new equipment," as Romney claims.
JP Morgan has a big stake in the debate – as do fellow bank-bailout beneficiaries Citigroup, Bank of America and Goldman Sachs. Combined, the four financial giants have $87 billion in untaxed profits stockpiled offshore. That's similar to the combined offshore profits of drug giants Pfizer and Merck at $89 billion. Tech giants Cisco and Microsoft have more than $61 billion they'd like to bring home, while Big Oil companies Exxon and Chevron have $56 billion. The company with the most to gain, by far – with offshored reserves of $94 billion – is corporate America's most notorious tax scofflaw, GE.
Romney's rival for the GOP nomination, Rick Perry, has also endorsed the tax amnesty for giant corporations. But for Perry, the proposal doesn't go far enough on behalf of the rich. "Why not talk about how you are going to repatriate those dollars at a substantially lower rate than 35 percent?" Perry said recently, stumping in New Hampshire. "Like zero."
In September, Perry went even further, proposing a flat tax that would take a sharp bite out of the paychecks of the poorest Americans – while slashing taxes by more than 40 percent for the wealthiest. When confronted by a reporter over the fact that his plan would give millions to the rich, Perry replied: "I don't care about that." His plan is almost as regressive as Herman Cain's original 9-9-9 plan, which called for increasing taxes on 84 percent of Americans – squeezing $4,400 a year out of every middle-class couple to finance a $455,000 tax cut for millionaires. What's more, both Perry and Cain want to abolish the estate tax entirely and eliminate all taxes on capital gains. A similar plan by Michele Bachmann would enable 23,000 millionaires to pay no taxes at all – while allowing the top 400 earners to pocket nearly two-thirds of their income tax-free, and then pass those riches on to their heirs without paying a penny. "It's madness," says Stiglitz. "And it is dangerous to the fiscal order. The wealthy know very well how to convert normal income to capital gains income."
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