Enough with the He Said/He Said: Congressional Budget Office Lays Down Some Facts and Figures

A new study on President Bush’s tax cuts reveals that the middle class is paying more of the tax burden than they were three years ago, while the wealthiest Americans are paying a smaller share than they were in 2001.

That’s not to say that the wealthiest Americans don’t pay a larger percentage of the total tax dollars collected - they actually pay 63.5 percent of total taxes while the middle-class pays 19.5 percent.

But Americans in the top 20 percent of earners (whose incomes averaged to $182,700 in 2001) are paying .9 percent less than they did before the Bush tax cuts, and the richest 1 percent of Americans (folks who earn an average of 1.1 million) are paying 2.1 percent less than they did before, while middle-income Americans are paying .8 percent more.

That’s because one-third of Bush’s tax cuts have gone to the wealthiest Americans, according to a Congressional Budget Office report released August 13, 2004.

While these findings echo Democrats’ claims, they have more resonance than partisan statements because the Congressional Budget Office (CBO) is a non-partisan group that works under a Republican Congress and president.

Of course, the parties interpret the CBO report differently, each according to its own philosophy and candidate’s platform.

Democrats’ view

Democrats say that the CBO report is hard proof of what they’ve been saying all along, that the majority of Bush tax cuts favor the wealthy and do little for the average American family.

The report may be a boost to the Kerry campaign, which has criticized Bush’s tax policies from the beginning.

Kerry promises to continue the tax cuts that aid middle-class families, such as the increased child tax credit and the marriage penalty relief, while rolling back tax cuts for those who earn $200,000 or more.

The Democrats’ philosophy is that higher-earners should continue to pay a larger portion of the tax burden, while middle-income and lower-income families should have a lighter burden. Further, Democrats feel that tax cuts for middle and lower-income families will help to generate the economy, since those groups are likely to spend their tax savings, while wealthier Americans are more likely to save or invest it.

Republicans’ view

Republicans point out that the CBO report shows federal tax relief for people of all income levels. When considering the federal tax rate only, the top 1 percent of earners is paying 26.7 percent less of their income, the middle 20 percent of taxpayers is paying 9.3 percent less, and the poorest taxpayers are paying 16 percent less.

And when Republicans look at the CBO numbers, they see that the rich are paying more in individual federal income taxes than they would have without the tax cuts. For example, when Medicare and Social Security are excluded, the rich are paying 3.7 percent more of total income tax dollars than they would have without the tax cuts. Meanwhile, the middle-class is paying 1 percent less of total federal income tax dollars, with Social Security and Medicare excluded.

But Republicans are not denying that the Bush tax cuts provide relief to the wealthy. Republican party aides explained to The Washington Post that wealthy Americans deserve their turn, because in the 1990s, tax rates for lower-income families fell.

To the Grand Old Party (GOP or Republican Party), Bush’s tax cuts are fair because they provide tax relief to all - the wealthy, middle-class, and working-class - albeit at different rates. They also feel that their tax policy stimulates the economy, a point with which Democrats disagree.

Tax cuts and the general economy

The GOP argues that the Bush tax cuts have put money back into investors’ hands, and that greater investment will benefit workers. This theory is based on the assumption that the money that companies save on taxes will ultimately go to higher salaries and better benefits for employees.

Democrats say that the Bush tax cuts have helped to cause the $7.3 trillion deficit. They say that by cutting taxes, the Bush administration is cutting much needed revenue, which goes to pay for things as common as interstates and as uncommon as the war in Iraq.

But tax cuts (or lack thereof) aren’t the only factor affecting the economy. High oil prices (it’s about $45 per barrel and shooting upwards), slow job growth, and a straggling stock market all affect the economy’s strength. And of course, all of these factors work together - oil prices affect the stock market affects job growth, job growth affects the stock market, oil prices affect job growth.

So never let a candidate tell you that a single policy (including an important tax policy) is causing the surge or dip in the economy. It is a variety of policies working together that make an economy, whatever its state.

So educate yourself through WomenMatter, and then vote for the party whose philosophy most closely matches your own.

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Article Posted on: 8/18/2004