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October 12, 1989 - Image 4

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The Michigan Daily, 1989-10-12

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Page 4

Thursday, October 12,1989

The Michigan DailyM

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Edited and managed by students at The University of Michigan
420 Maynard St.
Vol. C, No. 27 Ann Arbor, MI 48109
Unsigned editorials represent a majority of the Daily's Editorial Board. All other
cartoons, signed articles, and letters do not necessarily represent the opinion
of the Daily.
Capital gains for who.?



war on


THE NEW capital gains tax reduction,
supported by the House (239-190),
and likely to pass in the Senate, will
further widen the gap between the
wealthy and the poor in this country, a
gap that has been growing since the
beginning of the Reagan administra-
This is the third tax reform in eight
years, following the 1981 and 1986
packages. Unlike the previous two,
this tax reform bill is not described by
its supporters as one which benefits the
middle class. The mood of the nation
today allows politicians to unabashedly
admit that the top 1.1 percent of U.S.
taxpayers - those with annual in-
comes of $100,000 or more - will
receive 80 percent of the benefit from
this bill. 60 percent of the benefit will
go to less than 1/5 of 1 percent of U.S.
citizens, those with taxable incomes of
over $200,000 per year. In other
words, of the 150 million taxpayers in
the country, only 300,000 will benefit
- from this bill.
What capital gains are
Remember, taxable income differs
from gross pay; it is the amount of
money earned after deductions are
taken. Households with taxable in-
comes of $200,000 earn a total income
of $300,000 or more. According to
Congress' Joint Committee on
Taxation, this new capital gains tax cut
will provide the richest 375,000 tax-
payers in the U.S. an average of
$25,000 each per year. This benefit is
higher than the median annual income
in the U.S.- $23,450 in 1986 dollars.
Capital gains include profits from the
sale of stocks, bonds, property, and
other assets, including - due to its
successful industry lobby - timber.
The reduction completely excludes
from taxation 30 percent of the profit
from the sale of assets. Remaining
capital gains, taxed at a rate of 28 per-
cent, bring the effective maximum tax
on capital gains to 19.6 percent.
. - The 1986 Tax Reform Act
This reduction undermines the 1986
Tax Reform Act, that so-called monu-
mental piece of legislation which re-
duced the tax rate for the very wealthy.
The Reagan years saw this maximum
drop from 70 to 28 percent, and the
capital gains tax fall to 33 percent. The
1986 tax measure, which eliminated tax
loopholes and shelters, was suppos-
edly designed to increase the overall
federal tax paid by the wealthiest fifth
of the U.S. population.
Bush objected to the 1986 measure
from the very first. Promoting a ver-
sion of trickle-down economics, he ar-
gued that low taxes for the rich would
ultimately increase tax revenues by en-
couraging capital reinvestment and
promoting jobs. But evidence to sup-
port such theories remains scanty at
best. While initially the tax reduction
may increase revenues by encouraging
people to sell, even Reagan's own trea-
-sury department, in a 1985 study on
the long-term consequences of cutting
1 capital gains, concluded that so-called
stimulating economic effects "could not
be detected in any statistical compari-
son...of the economy before and after"
(Detroit Free Press 9/29/89).
In fact, the economic success of

western European countries - such as
West Germany and Sweden - sug-
gests just the opposite. The combina-
tion of high income tax and low interest
rates promotes economic reinvestment.
Providing little benefit to the greedy,
such rates discourage people from
hoarding their profit, and instead
oromot them to reinvest in the econ-

Issue is political
Republican leaders claim that the de-
bate about the cut concerns not so
much tax policy but political philoso-
phy. Yet, the two are inextricably con-
nected. Whether or not one believes
that the wealthy should pay a higher
share of taxes than the middle and
working classes depends absolutely on
the social strata politicians hope to sup-
port. House Republican leader Bob
Michel of Illinois argues that while the
"Democratic Party believes in the re-
distribution of wealth, the Republican
Party believes in creating wealth." That
a politician can baldly state his bias to-
ward the wealthy without fearing a loss
of votes reveals a shift in the political
climate over the past ten years.
Even the recently defeated
Democratic party alternative to the new
capital gains reduction falls short of the
goal to further equalize income and re-
duce the gap between the richest and
pooret members of this nation. That
plan would have raised taxes on the
wealthiest 600,000 taxpayers, but only
from 28 percent to 33 percent, still far
below the previous 70 percent rating.
In addition, the plan would have pro-
vided tax breaks for individual retire-
ment accounts, accounts held largely
by the wealthiest fifth of the nation.
Though the Democratic plan was touted
as one that would aid middle income
workers, it- like its Republican
counterpart- would not have substan-
tially eased the tax burden for the ma-
jority of U.S. citizens.
Shrinking middle class
Confusion surrounding the term
"middle class" provides politicians
seeking to help the wealthy an easy
cover for their projects: For instance,
Reagan pushed the 1981 Federal Tax
Reform measure as one that helped
those solidly middle class households
earning annual incomes of $50,000.
But such an income level is not middle
class; it is wealthy. In 1981, only
slightly more than 5 percent of all fam-
ilies had annual incomes equal to or
greater than $50,000. While the house-
holds in the top fifth income level
saved, on average, $2439 annually be-
cause of the reform, those in the lowest
fifth saved less than $3 each.
Since 1978, the U.S. middle class
has been shrinking. Though most
families in this country describe them-
selves as middle-class, statistics reveal
that those earning a middle income
level - $19,000 to $47,000 a year, a
large income range - have decreased
by 8 percent in the past decade. Two-
thirds of those leaving the middle class
fell in income level, and one-third of
them rose to upper-class status.
There are several reasons for this
shift, including cuts in social pro-
grams, financial aid, unemployment in-
surance and social security and welfare
subsidies. The new capital gains cut
will simply exacerbate this trend. As
described in a New York Times edito-
rial the plan is wrong. Profoundly
wrong. This country needs to stop
giving tax breaks to the wealthy at the
expense of the poor. If this nation is to
live up to its democratic ideals, it needs
a fair tax plan, one which requires the
rich to pay their share to support pro-
grams needed by the majority of U.S.
No member of this country should
make millions, or even billions , of

dollars, while others go hungry. It is
time that the middle and working
classes demand an end to such
inequities. Last weekend's Housing
Now march on Washington was a
good way to initiate this demand, and it
is important that the almost 99 percent
of the nation who will not benefit from
tiei tax haruain Fr thba o a tk-an

By Solidarity
As Nicaragua prepares for open elec-
tions, El Salvador's FMLN initiates peace
talks with the ARENA government, Cuba
criticizes Soviet perestroika, and Mr.
Baker and Mr. Shevardnadze warm to each
other's company, the real "threat" which
confronts Washington's policy makers is
to find a new way of justifying U.S. in-
tervention in Latin America to an increas-
ingly dubious U.S. public. Because the
"spectre of communism" is no longer
convincing as "a national security risk,"
the Bush Administration has decided to
serve up the war on drugs as the new altar
at which Latin Americans' rights to self-
determination and economic interdepen-
dence can be sacrificed.
Bush's new moral crusade is especially
tragic - and outrageous -because drugs,
unlike the invoked threat of communist
invasion, lie at the crux of an array of very
real and legitimate social, economic, and
political ills afflicting both this country
and Latin America. The serious nature of
the drug problem underscores the cynical
nature of Bush's "drug war" which will ac-
tually serve to exacerbate the very crisis it
pretends to address. Washington cannot
claim a serious interest in eradicating a
drug economy if the aid it provides focuses
more on fighting leftist insurgencies in
the region than on tackling the same re-
gion's devastated economies and aiding its
impoverished peoples.
Columbia, Peru, and Bolivia form the
centerpiece to Latin American drug traf-
ficking; Peru and Bolivia grow the cocaine
that Columbia refines. All three countries
are economically dependent on the drug
trade, thanks to their longstanding reliance
on export cash crops - a dependence rig-
orously enjoined upon them for over a
century by the United Sates and its allies
in the World Bank and International
Monetary Fund (IMF). All three have dis-
couraged countries like Peru from institut-
ing import-substitution programs through
which they might have fostered local in-
dustry and achieved a modicum of indepen-
Consequently, Latin America is perpet-
ually held hostage by the arbitrary fluctua-

tions in world commodity prices.
Throughout the 1980s, the region has
been earning less and less from its ex-
ports, both in terms of their prices on
world markets and in terms of what their
sales can buy in Western manufactures. At
the beginning of 1987, commodity prices
were lower compared to the price of manu-
factured goods than at any time since
World War II.
To make matters worse, the supposedly
"free market" U.S. imposes strict quotas
on many of the area's products, such as
cut flowers and sugar. And the recent U.S.
decision to unilaterally abrogate a 74 na-
tion coffee agreement will cost Colombia
alone $500 million dollars - far more
than the $100 million Bush provided
Bogota for the "drug war."
Is it surprising, in this context, that
Andean farmers struggling just to survive
are converting to lucrative cocoa produc-
tion? Or that 300,000 people depend on
cocoa production in Bolivia, where the
close to half billion dollars that enters the
country in drug profits rivals the $600
million in legal trade? Should we wonder
that next door Peru makes between $700
million and $1.2 billion per year on drugs,
compared to legal exports of $2.5 billion
and that more drug money enters
Colombia ($2.5 billion) than the country
makes from the sales of its largest export,

against suspected supporters of the
Sendero Luminoso guerrilla movement are
one of the main reasons that Peru last yeari
enjoyed the dubious honor of leading the
world in political murders and disappear-
The U.S. State Department, which tips
its hand when it states "there is no way to
handle the problem of cocoa unless the
problem of Sendero is handled as well,"
disregards the ramifications of U.S. partic-
ipation in such military maneuvers. Those
ramifications are complex. In Colombia
the neo-fascist Morena party - virulently
anti-communist and pro-capitalist -
brings together drug barons and peasants
on a strong anti-United States platform. In
Bolivia last June, a government drug raid
- carried out with U.S. assistance -
failed to seize a drug king pin when local
residents aligned themselves against gov-
ernment forces. And in Peru, U.S. inter-
vention on the side of a brutal government
has contributed to a growing link between
Sandero, the drug mafia, and cocoa grow-*
In all three countries, the consequences
of U.S. intervention have caused an in-
crease in economically impoverished peas-
ants, cocoa growers, right-wing death
death squads, economic dependency and ris-
ing spirals of violence. For these reasons
alone, Bush's policy must be vigorously

'The serious nature of the drug problem underscores the
cynical nature of Bush's "drug war" which will actually
serve to exacerbate the very crisis it pretends to address.'

coffee ($1.8 billion)? Or, should we not
wonder instead - since U.S. economic
policy is largely responsible for this situa-
tion in the first place - what all those
dollars Bush is shipping south are really
In Peru, for example, miners have
launched five major strikes this year.
Other strikes have involved the National
Health Service doctors, oil workers, elec-
trical workers, the administrative staff of
the state universities, the teacher's federa-
tion, and the peasant confederation.
Peruvian police broke up a meeting of the
latter in February by killing 8; 18 are re-
ported missing. And government atrocities

debated, challenged, and resisted. Latin
American peoples must be free to con-
struct economic and political movements
independent of the U.S. drug industry and
U.S. power. And U.S. residents deserve an
honest war on drugs - one which will
provide education, health care, and eco-g
nomic justice rather than rhetoric, dirty
wars, and the ongoing oppression of peo-
ples of color throughout the Americas, at
home and abroad.
Solidarity is an independent socialist or-
ganization committed to building a non-
secretarian, activist-oriented left in the
United States.



all the time


By Tom Abowd

The Moscobiyya in West Jerusalem has
become notorious as a center of torture
and interrogation. Within the walls of the
center Israeli authorities regularly beat,
humiliate, and even kill Palestinian pris-
oners who they feel are "security threats"
to the State of Israel. Today Palestinian
Dr. Riad Malki, activist, intellectual,
community leader, and human rights advo-
cate is detained without charge in the
Moscobiyya. His arrest came shortly be-
fore he was scheduled to meet with foreign
consuls at a press conference in Jerusalem
concerning Israel's recent repressive mea-
sures taken against the inhabitants of the
Palestinian village of Beit Sahour.
Dr. Malki is a professor at Bir Zeit
University in the West Bank. His only
crimes are his continual efforts tO expose
the brutality which the Israeli Defense
Forces perpetrate daily against his people
and to seek an end to the military occupa-
tion of his homeland. He has written nu-
merous articles about the soc . ecnomic
conditions of the Palestinian v on n

the occupied territories and has done exten-
sive research on the expropriation of
Palestinian goods and products by the Is-
raeli authorities. He has also been active
in monitoring human rights abuses in
According to eyewitnesses, the details of
his arrest are as follows: At 7:30 a.m on
Tuesday October 3, the Civil Administra-
tion of the West Bank called Dr. Malki,
and requested his presence at the Military
Government Building in Ramallah. Upon
arrival he was handcuffed, arrested, and in-
terrogated. The military interrogators then
took him back to his house where they
searched his room. They then left in the
jeep with Dr. Malki, telling his mother to
"say goodbye to your son, and then get
him a lawyer."
Like Dr. Malki, Palestinian leaders par-
ticularly active in the str *gle for self-d-
termination and statehood often find them-
selves in Israeli prisons for months, some-
times years, often without charge or trial.
Riad has participated in international con-
ferences throughout the c.rld w is m-
vited by the (' R.bo alitkon

to address their seminar in Atlanta during
the Democratic National Convention in
July,1988. He has been active in organiz-
ing fact-finding missions to occupied
Palestine and has spoken before the United
Riad's fate can not be known at this
point. To date, there is no news of his
condition and his lawyer is forbidden from
visiting him.
Urgent action is necessary to win the
release of Dr. Malki. Israeli measures
to limit Palestinian freedom of
expression necessitates an unwavering
show of support by those in this country
who appreciate such rights. All those
interested in helping with the campaign
to free Dr. Malki are urged to send a
telex to: Yitzak Rabin, Minister of
Defense, Israeli Defense Ministry
Telex Number; 371434 MOD IL. The
text of the telex is suggested as follows:

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