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Tax `fairness' is in eye of the beholder By Richard Reeves WASHINGTON - Our new secretary of the treasury, Paul O'Neill, had this to say the other day: "I think we've demonstrated as a people that we don't think some form of socialism is the way to run a society. I think it is really corrosive to have this argument about the rich and poor." In other words, Republicans are against class warfare. As they should be. They've already won that war. Did I mention that O'Neill, the former chairman of Alcoa, made $59 million last year in salary and stock options? And that he paid about the same payroll tax as you did? Of course, I don't know exactly what you paid. But I know what he paid: $5,829.30. The payroll tax is listed on your pay slip as "FICA," for Federal Insurance Contribution Act. That means Social Security and Medicare. It is, in effect, a flat tax with reservations. We all pay the same rate: 7.65 percent of every dollar we make up to $76,200. You, me, Steve Forbes, Paul O'Neill and Bill Gates. (Our employers match our payments, so economists, assuming that the employers' share would go to each of us as additional pay, calculate the payroll tax as 15.3 percent of every dollar up to $76,200. Doing it that way, which I have not, means that O'Neill and every other American earning $76,200 or more could be said to be paying $11,685.60. But I don't think the boss would pass along every buck if the government did not force him to do it.) The nice man in the White House says his tax cut, $1.6 trillion and counting, is fair to all classes because it is across-the-board. The fairness argument is carried by conservative thinkers such as Doug Bandow of the CATO Institute, who put it this way the other day: "Well, now. There's a reason across-the-board cuts 'favor' the rich. The rich pay more in taxes. A lot more." So they do. But there are legitimate questions about whether they should be paying a lot, lot more, as they would be if both income and payroll taxes were more progressive. President Bush wants to cut only the progressive "income tax" rates, which is a way to channel more money to Paul O'Neill and other members of what his father, the first President Bush, liked to call "the investing classes." Or, one might say, "the winners" of class wars. The fact is that the rise of FICA taxes, particularly during the administration of tax-hating class-war hero Ronald Reagan, has made the "income" tax debate the playpen of the 20 percent of Americans who pay more in income taxes than in payroll taxes. Right now, 80 percent of us pay more in payroll taxes - if you include employer contributions - and Bush has no intention of doing anything about that. When it comes to taxes, "fairness" is in the eye of the beholder, or the payers. The president and other Republican winners say the fair way is a scheme that gives the real breaks to the biggest payers. Payers, that is, of income taxes. If the same standard of fairness was applied to payroll taxes, O'Neill would be paying more than $4.5 million - or more than $9 million by the doubling standard - rather than $5,829.30 or $11,658.60. The president says his way and his numbers are "the right thing," and that they are part of "the agenda" endorsed by the American people in electing him. But we know, don't we, that less than half the voting nation voted for him, and there is no sure way to determine how many of those votes were for his agenda. He wasn't all that clear, you may remember, about what that agenda was. One way or another, though, he has the job. Now, after a short honeymoon, he and we will find out how well he can do it. The tax cut will be the first and perhaps the biggest test of all - and so far he has gotten his fairness side across very well. But there is another side to the story of class warfare in America. Richard Reeves covers national politics for The Associated Press Visit our back issue library Email your... Technical questions & comments to: WebMaster Daily Tidings editorial comments & questions to: Editor Visit our other Western Oregon Newspapers... | Albany Democrat-Herald | Ashland Daily Tidings | Corvallis Gazette-Times | | Lebanon Express | Newport News-Times | Springfield News | Cottage Grove Sentinel | Ashland Daily Tidings 1661 Siskiyou Blvd. Ashland, OR 97520 Telephone 541-482-3456 © Copyright 2001 Lee Northwest Publishing