Taxes

Cutting Remarks

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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."