The Proposed Tax Cut Really Works - Here's How
The New York Times has published a comprehensive story showing exactly how President Bush's tax cut meets all the criteria described in the President's message to Congress last week. This analysis, which was prepared by Deloitte & Touche, shows exactly which taxpayers will be affected and how.
Assuming the entire tax plan is enacted, and of course the plan has yet to even be presented to Congress, here's how the plan will work:
- The richest 1 percent of taxpayers, those with annual incomes over $370,000, now pay 31.5 percent of all income taxes. Those taxpayers will see a reduction in tax due to a reduction in the tax rate schedules, however, because the overall tax burden of all taxpayers will decrease, this top 1 percent of taxpayers they would see an increase to 32.6 percent in their share of all taxes.
- Six million taxpayers with the lowest current rates of income tax, will have their income tax completely abolished.
- Taxpayers with incomes between $30,000 and $50,000 will see an average tax reduction of 19 percent.
- Taxpayers with incomes over $200,000 will see an average tax reduction of 7 percent.
While Democrats argue that taxpayers with the highest incomes will see the largest tax cuts, Republicans counter by reminding us that, under any plan, people who pay very little in taxes would only be able to see a relatively small tax reduction.
Furthermore, Republicans are quick to remind those willing to listen that the wealthiest taxpayers have seen the largest increase in taxes over the past decade. Although income levels of the top 1 percent of taxpayers have increased by more than 40% over the last decade, taxation on the same group has increased by more than 50%. According to IRS statistics, the wealthiest 1 percent of taxpayers paid 19 percent of the total tax burden in 1980 and pay more than 30 percent of the tax burden now.
It would appear that, no matter where you stand on the tax bill politically, you can use the numbers to argue your side. If you are against the tax bill because you feel it favors the wealthy, you can use the numbers to show how the wealthiest taxpayers get a larger cut. On the other side, you can show how the wealthiest taxpayers will pay an even greater percent of the tax. If you favor reductions for low-income taxpayers, you can show how the tax bill removes millions from the tax roles. If you feel low income taxpayers aren't paying their share, you can argue that this bill reduces everyone's share, but low income taxpayers see a smaller reduction than high rollers.
President Bush may have made the point most clearly during his speech last week when he said, "Some say my tax plan is too big. Others say it's too small. I respectfully disagree. This plan is just right." You can read the full text of the President's address to Congress in which he laid out his plans to change taxation of Americans.