Bush's tax cuts are unfair to the rich.

How the dismal science applies to your life.
Oct. 21 2004 7:20 AM

Bush's Tax Cuts Are Unfair ...

To the rich.

The Bush tax cuts (which Congress just voted to extend) are an affront to the most fundamental principles of fairness. They are skewed in favor of those who already pay less than their rightful share of taxes and shift the burden even farther onto the shoulders of the most overtaxed. In other words, the Bush tax cuts are unfair to the rich.

I know there's a lot of hype to the contrary, but look at the numbers. If you and your spouse have a taxable income of $60,000 a year, you've had almost a 24 percent income tax cut since President Bush took office. (And ditto if your income was just $20,000.) Meanwhile, the folks who make $350,000 a year got a cut of only about 12.5 percent; those who make $1 million a year got an even smaller cut.

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Pre-Bush, the $1 million a year couple paid 33 times as much as the $60,000 couple; today they pay more than 38 times as much. Here's the big picture: 

Overall, the biggest percentage cuts went to the poorest of the poor (those with incomes in the $10,000 range) and the next biggest to those making about $60,000. After that, with some minor dips up and down, the relative size of your tax cut falls off as your income rises.

That's if you pay taxes only on ordinary income. But what about capital gains, dividends, and inheritance—the cuts that supposedly skew the gains in favor of the rich? Well, let's throw all those changes in, and while we're at it let's include changes in the child-care tax credit, the earned income tax credit, the alternative minimum tax, and payroll taxes for Social Security and Medicare.

Here's what we get. The biggest percentage tax cut—about 17.6 percent—went to taxpayers in the second-lowest quintile, that is to taxpayers with below-average incomes. After that, the size of the tax cut falls off as you move from the lower middle to the middle middle (12.6 percent) to the upper middle class (9.9 percent). It rises again slightly for the top quintile, but only to a little over 11 percent.

Moreover, if you break that top quintile down into finer pieces, you discover that the super-rich weren't treated much better than the near-super-rich—and certainly no better than the middle class. If you were in the top 20 percent of taxpayers, your tax cut was about 11 percent. If you were in the top 1 percent, your tax cut was still about 11 percent. And if you were in the top one-tenth of 1 percent? Then you got about a 12.7 percent cut—almost exactly the same as the median taxpayer.

Well, you might say, at least everyone got a tax cut. But that's true only under a ridiculously literal interpretation of the term "tax cut." In fact, federal spending has increased dramatically under President Bush (with only a small fraction of that spending attributable to the war). Sooner or later, somebody's going to have to pay for all that spending, which means that just as the president's been cutting the taxes of today, he's been raising the taxes of tomorrow.

And who's going to pay those taxes? The "cuts" of the past few years have established a precedent that in the future the rich will bear a larger share of the burden than they bore in the past. Thanks to the president, the tax code is more progressive now than it's been in recent memory, and that's a hard sort of change to undo. We got where we are by cutting taxes mostly for the poor and the middle class; to reverse that, you'd have to raise taxes mostly on the poor and the middle class—and think of the outcry that would cause.

So in the not too distant future, most of us will be paying higher taxes, but the rich will be paying a larger share of those taxes than anyone would have expected before the Republicans came to town. How should we feel about that?

My own opinion is that the rich already pay too much—it seems patently unfair to ask anyone to pay over 30 times as much as his neighbors (unless he receives 30 times as much in government services, which strikes me as implausible). If you share my sense of fairness, you'll join me in condemning the president's tax policy.

But if, on the other hand, you believe that the tax system should soak the rich even more than it already does—or, to put it more genteelly, that the tax system should be more progressive than it already is—if, in other words, you are a mainstream Democrat—then George W. Bush is your guy.

Steven E. Landsburg is the author, most recently, ofMore Sex Is Safer Sex: The Unconventional Wisdom of Economics. You can e-mail him at armchair@landsburg.com.

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