Sitting atop record budget surpluses, Republicans have been pondering a 10 percent, across-the-board income tax cut. But they've also been pondering this political syllogism: Only people with income pay income taxes; Democrats consider people with incomes "rich"; therefore, Republicans will be attacked for pushing a tax cut that favors the rich.
Indeed, President Clinton has warned that a GOP plan for an across-the-board tax cut would "benefit, clearly, the wealthiest Americans." House Minority Leader Richard Gephardt (D-Mo.) preemptively slammed the plan as "a massive GOP tax cut for the wealthy."
The data behind these charges came from a widely circulated analysis by Citizens for Tax Justice, a left-of-center advocacy group. "Almost two-thirds of tax cuts would go to best-off 10%," screams the headline of a CTJ press release touting the study, which claims that 60 percent of taxpayers would get less than 10 percent of the trimmed tax dollars.
That's true--and less damning than it seems. The bottom 62 percent of taxpayers, those with annual incomes under $40,000, would get only one-tenth of the total income tax savings under a plan that trims each tax rate by 10 percent. But these individuals currently pay less than 5 percent of total income taxes, so they'll get back a disproportionate share of the cut. In contrast, the top 2 percent of earners--those who make more than $200,000 a year--currently pay a little over 40 percent of all income taxes. Yet they would snag only 39 percent of the total dollars involved in a 10 percent rate cut.
To be sure, there's no getting around the fact that tax cuts will only return money to those who pay taxes--and that the more total dollars you pay in taxes, the more total dollars you will likely save under any reform. But in proportional terms, the 10 percent across-the-board cut actually favors lower-income taxpayers.
Unfortunately, it doesn't take much demagoguery to make many Republicans go weak in the knees on the tax issue; in fact, all reports indicate that the push for a 10 percent, across-the-board cut is facing ever-increasing odds. After all, as Rep. Nancy Johnson (R-Conn.) told The Washington Post, "An across-the-board cut isn't the right policy for this time….When you do an across-the-board cut, it tends to help the top earners the most."