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1:21 PM Tue, Oct. 16th

CBO's taxing report's timing is suspect

WASHINGTON – The Congressional Budget Office (CBO) recently rolled out a suspiciously timed analysis that, its Democratic sponsors say, shows the tax burden is shifting to the middle class under President Bush's tax cuts.

But, in fact, the CBO study shows and flatly states that everyone, especially the middle class, has benefited from the Bush tax cuts, whose heaviest tax reductions go to lower- to middle-income people, 6 million of whom were removed from the tax rolls or helped by the Earned Income Tax Credit; working couples who got marriage penalty relief; and families with children whose per-child tax credit was doubled to $1,000.

In a paper titled "Effective Federal Tax Rates Under Current Law, 2001 to 2014," the CBO clearly states that Bush's tax cuts "lowered individual income taxes for all taxpayers."

But this is a presidential election year and congressional Democrats hoped to make some political hay – and help John Kerry's presidential bid – by asking the CBO to come up with a distributional tax burden study designed to promote their class warfare notion that Bush's economic recovery plan cut taxes for the rich and raised taxes for everybody else.

When the study was completed a week or so ago, Democratic leaders leaked it to their pals in the news media and spun its findings to promote their "rich get richer" obsession.

But tax analysts who saw the study said it shows nothing of the kind.

"A lot of ink is being spilled about modest shifts in relative tax burdens," former CBO Director Robert Reischauer told me. "Virtually all taxpayers benefit to some degree from the tax cuts."

Many of the news reports on the study focused on data or projections showing that the total share of taxes paid by the wealthy has gone down and that revenue from the middle-income earners has risen. No one asked why this could be, buying into the Democrats' notion that Bush's tax cuts favored the wealthy over the middle class.

The stock market's long slide over the past four years that have cut into the portfolio incomes of upper-income people is one explanation. Another is that middle-class incomes have risen as a result of Bush's pro-growth tax cuts and the economic recovery that followed them, so it follows that tax revenues from this group have risen as well. (Something the CBO's no-growth, static analysis ignores.)

In fact, the Bush tax cuts reduced middle-income taxes this year "as a share of income from 5.2 percent to 3.5 percent, a decline of 1.7 percentage points relative to the share that would be paid under 2000 tax law," said Rep. Jim Saxton of New Jersey, the Republican vice chairman of the Joint Economic Committee.

As for those in the top income brackets, the IRS says that upper-income people are still paying the lion's share of all federal income taxes paid.

If this isn't an extremely progressive income tax system, where upper income people are paying more than their "fair share," I don't know what is.

Copyright 2004, United Feature Syndicate, Inc.