Friday :: Aug 13, 2004

CBO Confirms Bush Tax Cuts Shift Burden From Rich To Middle Class

by Steve

(Thanks to the Post for their graphic)

OK, let the debate begin. Several months ago, Congressional Democrats asked the nonpartisan Congressional Budget Office to conduct a study on the impact of the Bush tax cuts on the tax burdens amongst income groups. The CBO released its findings today, and to no one’s surprise around this blog, the CBO found that the Bush tax cuts have shifted part of the tax burden of the top fifth income earners to the middle and upper middle class. Most striking to many, but not to us around here, is the fact that the share of overall income taxes paid by the top 1% group, those earning $1.1 million annually and over, saw their share of the overall tax burden drop substantially. Who picked up the tab for this shift away from the very well off? Why, the middle and upper middle classes, of course.

The CBO study, due to be released today, found that the wealthiest 20 percent, whose incomes averaged $182,700 in 2001, saw their share of federal taxes drop from 64.4 percent of total tax payments in 2001 to 63.5 percent this year. The top 1 percent, earning $1.1 million, saw their share fall to 20.1 percent of the total, from 22.2 percent.

Republicans of course will say that the well off should get the biggest tax breaks because they pay most of the income taxes in this country. But why exactly should the well off have gotten the tax break in the first place, and why at the expense of the middle and upper middle classes? This same top 1% of income earners had just come off of one of their best decades ever, brought to them by a Democratic president, with the tax scheme in place at the time. We were told by the new administration that as the economy cooled off these tax cuts aimed at the top brackets would jump start the economy and generate millions of jobs. Now we see that none of the job growth claims from the tax cuts have come true, deficits have returned with a vengeance for decades ahead, and the stimulative effect from these top-end tax cuts has petered out already. Plus, it is arguable how much the tax cuts contributed to the recent “recovery” as compared to the low interest rates and home refinancing boom.

Plus, it needs to be noted that Bush's tax cuts have also exacerbated decades-old policies of taxing earnings from labor at a higher rate than investment income (dividend and capital gains tax cuts), to the point that wage earners are subsidizing investors to the tune of over $300 billion a year, if both were taxed the same. It goes without saying that those revenues could go a ways towards cutting the deficit, provide health insurance to the uninsured (thereby reducing costs to employers), and shore up Social Security and Medicare for the long haul (along with benefit changes). Again, Republicans will say that without investment incentives our economy will suffer, but no one has made a solid case why the country's wage earners should subsidize the investor class and Wall Street, especially in an environment of corporate scandals, executive greed, growing wage gaps, and fattening bottom lines rather than employee investment.

Kerry has smartly retuned his message of late away from daily verbal jousting with Bush and Cheney on Iraq and terrorism to thrashing the White House over its domestic record and the shifting of more of the tax burden from the rich to the middle class, as now confirmed by the CBO.

Steve :: 8:47 AM :: Comments (13) :: Digg It!