Who Can Really Say?

Squeal Like a Pig

Outside the Beltway on income taxes.

We actually commissioned a government study to demonstrate that, given an across-the-board tax cut, the people who pay the most taxes are going to get the biggest cut? That a guy who pays more than $57,000 a year in federal income taxes gets a bigger cut than a guy who only earns $57,000 a year? Really?

Further, if the guy making $57,000 a year gets a tax cut of $1090, does he really think it's a tax hike because he's now paying a slightly higher share of the overall tax burden than he once was?

I partly disagree with the last point. I think the guy who makes $57,000 a year ought to keep an eye on the tax burden paid by his income grouping because it's the only objective way to measure the re-distributive effects of a progressive tax system such as ours over time.

There are many ways to measure taxation -- the most direct way is to ask "how much did they take out of my paycheck this time?" or "how much did I pay in taxes this year".

But that's not the only way to look at it. The $57,000 guy is in the middle quintile of incomes. That quintile paid 10% of all federal income taxes in 2001 (as the first Bush tax cuts went into effect), and it is expected to pay 10.5% of all income taxes in 2004, which is after both tax cuts. But if there had been no Bush tax cuts, it would have paid 10.3% of all income taxes in 2001 (more than the 10% it paid with the cuts) and would have been expected to pay 10.4% in 2004 if not for those cuts. So let's see, paying 10% instead of 10.3% is good, right? But paying 10.5% as opposed to paying 10.4% is bad. See the table here.

Jeebus! It was all about screwing the middle class after all! One tenth of one percent! Sqeal like a pig, boy!

Not as such. The fact is, everyone is paying lower taxes under the Bush tax cuts, not just the rich. And the fact also is that if the top income earners are paying a percent of taxes that is disproportionate to their income share, then when you cut taxes they are going to get the biggest part of the tax cut. And finally, no one can predict the precise percentage share from year to year paid by any one grouping. To suggest that Bush could fine tune these results to the degree that he was able to increase the middle-class's tax burden by a huge 0.10% requires one to credit him with having a cerebral cortex, and we know how hard that is to do. Nah, I think he's just lucky.

Posted by Peter at August 13, 2004 09:25 PM