A clever cut
I’ve gotta hand it to the Bush economic team: they certainly covered their bases with their tax cuts. According to a report released last Friday by the Congressional Budget Office (288kb PDF), not only did the tax cuts decrease everyone’s taxes, they also managed to shift the tax burden to the middle class.
Those who accept the administration’s official party line are happy because, hey, they got some extra money back! The wealthy are happy, too, because they got a bigger slice of the pie, and will continue to do so for years. But those of us who aren’t rich or willing to immediately swallow everything we’re spoon-fed by the administration questioned these cuts, and found out they tasted bitter indeed.
Despite what the Conspiracy to Keep You Poor and Stupid claims, statements that this report proves the tax cuts favour the rich aren’t “liberal lies.” The honest truth, according to the non-partisan CBO, is that under Bush’s tax plan, the middle class ends up carrying a larger tax burden than it used to, while the rich’s tax burden decreases.
Don’t believe me? Look at the 16th page of that PDF, Table 2. Check out the third section of that table, entitled “Share of Total Federal Tax Liabilities.” Here’s the relevant data:
| Income Category | 2001 | 2004 |
|---|---|---|
| Lowest 20% | 1.1 | 1.1 |
| Second 20% | 5.0 | 5.2 |
| Third 20% | 10.0 | 10.5 |
| Fourth 20% | 18.5 | 19.5 |
| Highest 20% | 65.3 | 63.5 |
That data makes it very apparent that while the tax burden on the wealthiest 20% decreased, the burden on everyone else either stayed the same or rose. So while there may have been an overall decrease in amount of taxes paid for each income group, which Bush supporters can point to as “tax cuts for everyone,” the fact is that under Bush’s plan, the cut for the rich is propotionally larger than the cuts for everyone else, leaving everyone else to shoulder the resulting burden over time.
Bleah. That tastes awful.
August 17th, 2004 at 12:45 pm
Am I correct in assuming there’s no way to convince you that the rich are still paying more taxes than everyone else?
And, out of curiosity, how much do you want them to pay? What do you consider fair?
August 17th, 2004 at 1:12 pm
Of course they’re paying more. They make more, they pay more. I’m not arguing that. I’m pointing out that Bush’s tax cuts benefit the rich more than they benefit anyone else, and that I don’t consider that fair or sensible in the current economic climate.
I consider progressive taxation to be the best for the society as a whole. The more you make, the higher your taxation. I’ll gladly pay more than double my current taxes if my salary doubles, because I’ll still be making more money than I’m giving back, and my extra taxes will (hopefully) be used to make the country better.
August 17th, 2004 at 1:24 pm
Wait a minute, I just noticed something else. You said, “The honest truth, according to the non-partisan CBO, is that under Bush’s tax plan, the middle class ends up carrying a larger tax burden than it used to, while the rich’s tax burden decreases.” And then you cite the numbers from this year. But if you look at the numbers for 2005, the “share of total tax liabilities” goes down for everyone EXCEPT the highest quintile, which goes UP to 64.3. And then it’s not until 2011, when the upper quintile drops to 63.2 that their rate ever goes below what it is in 2004. It seems to me like you picked an arbitrary year–this one–to make your point when, if you had extended it even to next year, your point wouldn’t be quite as effective.
And, even though I don’t expect you to have answered the other question yet, I’d still love to know what you consider a fair share of the tax burden for rich people. To me, it already seems out of whack that, in 2004, the top 20% have a “share of total Federal tax liabilities” that, by your own numbers, is 63.5%. What percentage of taxes should the rich be paying? At what point does it suddenly stop being okay for you to demand they pay more? 64%? 70%? 70%? 90%? Or should you not have to pay anything at all? I’d love to hear your thoughts on this.
August 17th, 2004 at 1:27 pm
Oops… The second 70% should, of course, be 80%. But it could theoretically be any number between 70% and 90%–I think the point is valid with whatever number you choose.
August 17th, 2004 at 1:44 pm
No matter which year you pick in that table, the middle class’s tax burden increases and the upper class’s tax burden decreases compared to the 2001 values. For later years, even the lowest income class’s tax burden increases while the rich’s burden continues to decrease overall. I chose 2004 because it’s the year we’re currently living in, and it’s also the year that Donald Luskin at “The Conspiracy…” chose to compare to. My point stands.
I did answer your second question. I believe that progressive taxation is the way to go, and most beneficial for our country as a whole. The percentage of taxes paid should be based on wealth, so if the top 20% controls, say, 80% of the money in the country (which is fairly accurate, from what I’ve heard), they should shoulder at least 80% of the tax burden.
August 17th, 2004 at 1:49 pm
I see. How much, however, is too much? In your opinion, at what point can the rich pay too much?
August 17th, 2004 at 2:44 pm
You’re kind of asking me to develop an entire taxation plan, which I’m not prepared (or qualified) to do, and anything I come up with will certainly be far too simplistic to apply to the real world. This is kind of a pointless exercise.
But right now, based on the 80% figure, I would imagine asking the top 20% to shoulder, say, more than 85% of the tax burden is unreasonable. If their wealth increases, so would this estimate. If, somehow, they ever controlled 100% of the country’s wealth (leaving the rest of us living in abject poverty), then expecting them to pay 100% of the taxes needed is perfectly reasonable.
Where are you going with this?
August 17th, 2004 at 2:52 pm
I’m just trying to find the point at which you feel too much of their money is being taken away. Right now, that number seems to be at 85% which is, in effect, saying that rich people only deserve 15% of the money you earn. I guess I find that troubling, personally, but that’s just me. I’m not sure if you’re one of people from the MUD who has openly espoused Communism as being the ideal ecconomic system, but I don’t think you are. But claiming that 85% is a fair amount of money to take away from people who make more than you do… That’s not that far away from Communism, it seems to me, and it seems to me fundamentally flawed: Why should someone willingly open themselves up to having 85% of their money just taken away? Why not move somewhere else that wouldn’t happen? I don’t understand your point of view on this, I’m sorry.
But anyway, I saw this quote the other day that seems to be a pretty good explanation of all this. I don’t expect you to agree with it, but I thought I’d at least show it to you. (Before you ask, I don’t know the author personally–it was from a letter in The Wall Street Journal.) “As long as most Americans accept the moral premise that the needs of some are a moral claim on the lives and property of others, taxation won’t drop in any significant way. Taxes will be slashed only when Americans openly reject this premise and stand for the opposite proposition: that an individual’s income is 100% his private property, not to be taxed and redistributed to other people.”
August 17th, 2004 at 3:40 pm
I didn’t say the wealthiest 20% should have to pay 85% of their income in taxes, I said that they (collectively) should have to shoulder between 80% and 85% of the total national tax burden, since they control around 80% of the total national wealth. That’s a huge difference.
I can’t believe you are actually putting that quote forward as an example of your beliefs. That is one of the most selfish, greedy, heinous things I’ve seen said in a long time. Reject the premise that we have a moral obligation to help those in need? Claiming taxation is worse than letting poor people starve to death? Why on earth would anyone with a heart seriously advocate that?
Yes, that moral premise is what most Americans believe, because it’s right, and good, and decent. It’s being willing to help others out because sometimes they can’t help themselves. It’s understanding that there are people less fortunate than you and sacrificing some of what you have to possibly give them a chance. It’s being a compassionate, kind, loving human being. It’s realising that there are more important things in this world than having money, and that when we all work together, we can do a lot more than each of us working alone.
I am completely stunned.
August 17th, 2004 at 5:09 pm
Also stunned.
Also wondering where the money would come from to run the country. True, I think there are far far too many frivolous things being done with tax money, however some is needed. Either some tax revenue, or a completely different way of living which people who write things such as “As long as most Americans accept the moral premise that the needs of some are a moral claim on the lives and property of others…[ad nauseum]” would be far less capable of handling than shouldering their share of the bill..
Yay compassion.
August 18th, 2004 at 1:46 am
I was going to point out the obvious difference in the debate: Matthew consistently uses the term, “taking money away”, while Ryan consistently uses the term, “shouldering a share of the tax burden”. But I guess Matthew’s quote already threw that difference into relief.
Are the CBO’s figures only taking into account income tax? There’s a great post at Tilting at Windmills discussing the various types of taxes and cuts, and which are regressive. It’s likely that the top 20%’s share of the total tax burden (not just income tax) is actually a fair bit less than 60%, because most of the other taxes in place aren’t progressive like income tax.
August 18th, 2004 at 9:34 am
Joe,
I’m fairly certain the CBO figures take all taxes into account, since they have sections that just deal with income tax as well as sections that deal with total federal taxes. That Tilting post is great — I’ve seen it before, but now it’s going into my bookmarks. Thanks.
August 19th, 2004 at 5:29 am
Yeah, I think I’ve mentioned it here before, come to think of it.
September 8th, 2004 at 11:20 am
It should be pointed out that the tax burden of the middle class has increased not just because “the cut for the rich is propotionally larger than the cuts for everyone else,” but also because the resulting dearth of federal funding for programs states are required to carry out (think “No Child Left Behind”) forces subsequent hikes in property taxes, income taxes, etc. at the state and local levels.
September 8th, 2004 at 11:23 am
Eek… should probably read all the links first. My first comment is essentially the point made in the Tilting at Windmills link under “downloading.” My apologies for restating something, but I noticed the quote at the end of Ryan’s original post and wanted to add that little bit of nuance.