President Bush recently criticized Democrats for stirring up class warfare in America, but it was Bush himself who unleashed it.
It began with his support in the recent budget agreement for taking away from upper-middle-class taxpayers their family exemptions and deductions for mortgage interest and state and local taxes. These exemptions and deductions now exist only as loopholes for lower-income taxpayers.Bush is considering further assaults on upper-income taxpayers by cutting their Social Security and Medicare benefits. Unlike others, a "rich person," that is, a person with a retirement income above $25,000, has to pay income taxes on half of his Social Security benefits. The next step will be to make him pay income taxes on all of his Social Security benefits. This is a way, of course, of cutting benefits.
Bush's budget director, Richard Darman, has in mind a similar treatment for Medicare.
What is wrong, you might ask, with cutting "the rich" out of benefit programs? Two things.
First, the rich paid for these services like everyone else. Indeed, they pay more in taxes in proportion to benefits received than lower-income taxpayers. Although people with higher lifetime salaries receive larger Social Security checks than those with lower salaries, they actually get back less per dollar paid in. Now that the benefits are taxed, they get considerably less back.
The recent budget agreement added another discriminatory clause against higher-income taxpayers. The income threshold against which the Medicare tax is assessed was moved up from $54,000 to $125,000 without any compensating increase in benefits. Now having extracted more Medicare taxes from the rich, the government is considering curtailing their benefits.
If private insurance schemes tried to base premiums on income or to exclude people who had paid the premiums from the benefits, they would be sued for fraud and imprisoned. However, the government believes that it is free to discriminate and to break its contracts with impunity.
So much for the view there is greater morality in government than in business.
The majority who are not rich might approve the government's discrimination against the rich as a way of squeezing more money out of them. But this is short-sighted. If the government can break its contract with the rich, it can break it with the rest of us.
This leads to the second reason it is wrong to cheat the rich: It breaks the already weak link between taxes paid and services received.
In America the justification for taxes was that government would make good use of our money and return it in valuable services such as national defense and police that could not be privately organized. Supposedly, this is the difference between American democracy and the unjustifiable taxing of peasants by aristocrats or the colonists by King George III.
However, as taxes have risen, services to taxpayers have declined. In place of services to taxpayers, government now provides massive income transfers to those who succeed in organizing public policy for their aims. In addition to their taxes, taxpayers are now charged fees for services that governments formerly provided. For example, local tax revenues formerly paid for sewerage, which in many communities is now a fee added to water bills.
Federal judges have nullified police protection by elevating the criminal's welfare above that of society. Local governments contributed to the rising mayhem by replacing the policeman on his local beat with "cost-effective" roving patrol cars.
Class warfare has broken the link between taxes and public services. American government now reflects the aristocratic attitude that our taxes are its entitlement, which it then distributes to the favored.