Welfare for the poor vs. welfare for the rich

Ask those on welfare how reform is working

By Jean Rosenkranz

As welfare reauthorization works its way through Congress, the first-hand witnesses to welfare reform are conspicuously absent. If President Bush and Congress really want to know what has worked and what hasn’t worked in the current Temporary Assistance to Needy Families (TANF) program, why not ask its recipients?

Those who laud the success of welfare reform base their claim on the 62 percent drop in case-loads since 1996. They fail to mention that poverty, however, has decreased only by about two percentage points. Reduced case-loads matter little if poor people are still unable to feed their children, pay their bills and meet their basic needs.

Let’s ask the 40 percent of former recipients who now have neither jobs nor TANF benefits about the success of the program. Ten percent of that group are now homeless. Those who max out of their 60-month lifetime limit are permanently barred from any future welfare benefits, including the children who comprise 75 percent of all welfare recipients. Let’s ask the 60 percent of former recipients who are now employed about the success of the program. The average wage of the “successful” 60 percent is under $7 per hour — a wage that comes nowhere near raising them to the self-sufficiency standards set by their respective states. Let’s also ask the 1,352 South Dakota welfare parents (the majority of whom are mothers) struggling to hold their families together on an average monthly TANF payment of $325. That payment computes to $3.85 per hour for 20 hours and $2.56 per hour for 30 hours of work or community service hours required of TANF recipients.

If the work requirement is increased to 40 hours in the welfare reauthorization bill that becomes law, then these parents will have the “dignity and self-worth” of working for $1.92 an hour. I note a Rapid City Journal editorial that termed the TANF payment a “handout.” This $325 “handout” must pay for utilities, rent (or partial rent in the case of rent subsidy), clothing, school supplies, hair cuts, laundry, personal hygiene items, gasoline, car insurance, car maintenance (and often a car payment or other previously incurred debts). It also must cover non-food items not eligible for food stamps as well as food when the average food stamp allowance of 77 cents a meal doesn’t quite stretch a full month.

We would be hard-pressed to find Americans who would refer to tax deductions for mortgage interest, capital gains, taxes and pension contributions, or to Social Security, government retirement benefits, farm price supports and veterans benefits as handouts. It seems that middle-class subsidies are respectable; lower-class subsidies are handouts. If welfare reform has been such a success, why does the US Conference of Mayors and the National Coalition for the Homeless report significant increases in emergency food assistance requests and emergency shelter requests in 2001 at 23 percent and 13 percent, respectively? Why do we have a higher rate of childhood poverty in the United States than any other industrialized nation?

Source: Rapid City Journal

Corporate taxes are welfare for the wealthy

A surge in corporate tax welfare outlays could drive corporate income taxes down to their lowest level since the early 1980’s—when Reaganomics ruled the roost — and the second-lowest level in at least six decades, reports Citizens for Tax Justice in a recent report.  New corporate tax breaks in President Bush’s so-called “stimulus” package means the average taxpayer must make up for more $170 billion in each of the next two years.

General Electric, America’s most profitable corporation, reported $50.8 billion in US profits over the past five years, but paid only 11.5 percent of that in corporate taxes. Corporate tax welfare has been growing at a steadily increasing rate, the reports claimed, citing tax write-offs for stock options, congressional indifference to offshore corporate tax shelters and other tax breaks. The report said such benefits allow many companies to earn billions in profits, yet pay little or nothing in federal income taxes.

General Motors drove away with a fat wallet, as well.  The firm paid no taxes in three of the past five years, despite $12.5 billion in US profits; GM’s tax rate for the past three years was a negative 1.3 percent.

The Rich Get Richer…

Over the past 20 years, the income gap between the wealthy families and low-and middle-income families in the US rose to historic highs, despite sustained periods of economic growth in the 1980s and 90s, according to the AFL-CIO magazine America@Work.

New York saw the biggest increase in income inequality over that time—real income for the bottom fifth of families fell $800. The average income for the top one-fifth increased by $56,800.

Both the Economic Policy Institute and the Center on Budget Policy and Priorities have studied the income imbalance. For a copy of their study, Pulling Apart, A State-by-State Analysis of Income Trends, visit www.epinet.org or www.cbpp.org.

Estate Tax Repeal Defeated

Last week the US Senate refused to permanently repeal the federal estate tax.  If this bill had passed it would have only benefited the richest 2% of Americans, and negatively impacted the rest of the country.

Senator Phil Gramm, the Texas Republican who sponsored the legislation and is not running for another term amid the embarrassment of his wife’s involvement in the Enron debacle, complained that he feared the tax will go into effect again in 2011.  Under the $1.35 trillion tax cut that President Bush signed into law a year ago the estate tax is to be phased out entirely by 2010, but a “sunset clause” effective in May 2011 will restore the estate tax to the regulations in effect in May 2001.

The bulk of these wealth accumulations are from investments such as stocks, bonds and real estate. Without the estate tax, these gains would never be taxed at all, since income tax forgives those deferred taxes at death.  Why should a form of income that primarily goes to the rich be exempt from any taxation at all? The so-called “death tax” will have no effect on 98% of Americans, and half of all estate taxes are paid by the richest  0.1% of Americans.  These are not the people who need a helping hand from the government and other taxpayers.

In addition to benefiting only a few of the richest families in America, estate tax repeal would have serious economic consequences for the rest of us.  This is money that will be sorely needed to pay for improving education, access to health care, highways, as well as to secure the future of programs such Social Security and Medicare.  The obvious impact of estate tax repeal therefore would be either a crushing increase in the tax burden borne by middle and low income Americans, or extreme cutbacks in government services, not to mention fiscal chaos at the federal level.

Source: International Association of Machinists and Aerospace Workers (IAM)