Take the Rich Off Welfare

YESTERDAY, the tax returns of millions of Americans came due. Former Senator Fred Harris' New Populist Action group chose yesterday as the focus for demonstrations and teach-ins in cities around the country to convince Congress to change a tax system which favors the rich.

We applaud Harris' Tax Action campaign and urge a radical overhaul of the Internal Revenue Code.

The abuses built into the present system are obvious, and were raised over and over again in the last Presidential campaign, especially by George McGovern and George Wallace.

In 1969, for example, 21,317 people who earned more than $20,000 did not pay one penny in taxes. In 1970--the last year before the 1969 Tax Reform Act became effective -- 501 persons with incomes over $100,00 paid no taxes. Even after the act became effective, a 1972 Brookings Institute study showed that the effective tax rate on incomes over $100,000 amounted to 32.1 per cent, less than the 70 per cent rate theoretically required at the time by law.

Big corporations, especially oil companies, are also making a killing. In 1970, the major oil companies earned profits of $8.8 billion and paid taxes at an average rate of 8.7 per cent. In contrast, a $6000-a-year worker paid Federal taxes at a 16 per cent rate.

These are only a few examples of the way in which the tax system discriminates in favor of the wealthy.

Overall, Harris' group estimates that the tax code provides $25 billion in "welfare for the rich." Brookings economists Joseph Pechman and Benjamin Ochner go even further, asserting that Federal tax subsidies--which favor mainly the well-to-do -- amount to $77 billion.

The alleged purpose of the various tax bonanzas for the rich is to encourage private investment in socially productive enterprises. Far from serving the public good, however, the tax subsidies usually mean that low and middle-income workers must pay more in taxes to make up for all the revenue lost through loopholes. Moreover, indirect subsidies through loopholes are usually more expensive than direct government action and mean less money for socially useful public services (which have been branded "inflationary" by the Nixon Administration) like health care, housing, education and aid to the handicapped. In short, the Federal Internal Revenue Code amounts to "socialism for the rich, free enterprise for the poor."

How should the present system be changed? Senators McGovern and Muskie have proposed workable plans which could save at least $20 billion in lost revenue. The various proposals call for (among other reforms) increases in the low taxes on capital gains, in line with McGovern's campaign maxim that money made by money should be taxed as much as money made by men; further reduction of the depletion allowance on oil, gas and mineral resources; repeal of the 1971 Investment Tax Credit for corporations; reform of estate and gift taxes; the establishment of a minimum tax on persons with high income; repeal of favored treatment for foreign investments and income; a tightening of the tax provisions on the depreciation of assets and equipment; and an overall return of corporate taxes to their 1960 level, thus eliminating loopholes opened since then.

The average taxpayer cannot count on the Nixon Administration for help in the fight for tax justice. On June 22, 1972, President Nixon promised to send his own reform proposals to Congress by the end of the year. Congress has yet to see them.

What is required is the sustained pressure of low and middle-income taxpayers on Congress, and especially on the House Ways and Means Committee which is now reviewing the tax code. This pressure is especially important given the efforts being made by those who enjoy special privileges to preserve the present system. Harris' campaign is timely since the Ways and Means Committee threatened recently to postpone serious consideration of tax reform until after it acts on a new trade bill. Such procrastination could severely reduce the chances for substantial reform.

Welfare for the rich will end only when those paying the corporate welfare bill make clear that they are no longer willing to do so.