No Surprises Here

From today's Washinton Post:

"Since 2001, President Bush's tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found, a conclusion likely to roil the presidential election campaign.

The CBO study, due to be released today, found that the wealthiest 20 percent, whose incomes averaged $182,700 in 2001, saw their share of federal taxes drop from 64.4 percent of total tax payments in 2001 to 63.5 percent this year. The top 1 percent, earning $1.1 million, saw their share fall to 20.1 percent of the total, from 22.2 percent.

Over that same period, taxpayers with incomes from around $51,500 to around $75,600 saw their share of federal tax payments increase. Households earning around $75,600 saw their tax burden jump the most, from 18.7 percent of all taxes to 19.5 percent.

The analysis, requested in May by congressional Democrats, echoes similar studies by think tanks and Democratic activist groups. But the conclusions have heightened significance because of their source, a nonpartisan government agency headed by a former senior economist from the Bush White House, Douglas Holtz-Eakin."

Republican aides are quoted as saying that the report doesn't take into account the jobs created as a result of the tax cuts. Fair enough. But it also doesn't take into account any jobs lost because of burden-shifting to state and municipal governments, the drain on the economy of the massive deficits created by the tax cuts, and so forth. Besides, most economists I've read claim, plausibly, that the tax cuts were not particularly effective as stimuli, precisely because they disproportionately benefit the wealthy, who spend less of their income than other people.

Comments

[norbizness]

And people thought that there was no shared sacrifice paradigm that was operating in the Bush Administration. It would be nice if it was towards long-term solvency or body armor, but I'm happy to contribute to monocle deductions.

P.S. Math is hard.

[sidereal]

Hm. I'm all about firing Bush, but in all honesty this is just tricksiness with numbers. Nobody really cares what percentage of the tax income their payment represents. . all they care about is what their payment is. To analogize, if I spend 50$ for a DVD player, it doesn't really matter to me whether that's 50% of the income of Best Buy or 0.00005%. It cost the same to me.

Of course, when I say people don't care, I don't mean that these numbers won't have an effect. They bolster the queasy feeling that Bush sucks up to the rich at the expense of the little guy. I'm just saying that the caring won't be rational.

[Anarch]

I'm all about firing Bush, but in all honesty this is just tricksiness with numbers.

If it weren't for the rising deficit and debt, I'd agree with you. As it is, we're going to have to pay off Bush's largesse sooner or later -- and that means that the middle class will likely be doubly hit (once right now, once when the rates inevitably hike back up).

[Gary Farber]

It's worth noting that any number of conservatives are just fine with this. On principle they (the ones who take this stance) oppose progressive taxation as "immoral" and "unfair," and believe in, if we must tax, a flat tax as "fair."

Needless to say, I entirely disagree, but my point is that these sorts of arguments are useful up to a point with some, but not with any true conservative who outright opposes progressive taxation, which is an awful lot of the Right. Their response will be either "yeah, so?" or "right on!"

[hilzoy]

"Tricksiness with numbers"? I don't think so. First, it's not tricksy: it's fairly straightforward analysis by the CBO. But second, to amplify Anarch's point, you would of course be right IF the tax cuts had no consequences other than asking people to pay less in taxes now. But if that were true, we should just repeal all taxes now, since then everyone would benefit as much as possible, and there would (ex hypothesi) be no price to be paid. It's only when you factor in the deficit, the resulting drag on the economy and higher interest rates, the services that can't be provided because we don't have the money for them, the costs to state and local governments, and so on and so forth, that you can see a downside to tax cuts. Since a lot of that downside will be paid by the lower and middle classes, it's totally reasonable for them to ask whether what they are paying for is benefits to them or for the wealthy, who need it least.

And this is not some sort of mindless hostility to the rich. I am, in fact, one of those people who will benefit disproportionally from the Bush tax cuts, and I'm not consumed with self-hatred. I just don't see giving more money to the likes of me as worth sending this country into debt, especially when there are other important things to be done.

[Edward]

The "hatred of the rich" meme is loosing more and more steam all the time. From Bill Clinton, to Bruce Springsteen, to apparently hilzoy, there's a growing number of folks who would benefit from Bush's tax cuts who think he's making a mistake.

That makes those who approve of it look greedy and selfish.

Oh, I know, it's supposed to be helping create jobs. Burger flippers and maids...wahoo!

[sidereal]

"And this is not some sort of mindless hostility to the rich. "

I'm not suggesting it is. Nor am I suggesting that the Bush cuts do not disproportionately benefit the wealthy. Nor am I suggesting that the deficit will not have to be paid off. I'm just suggesting that using the percentage of tax revenue paid by any particular bracket doesn't strike me as a meaningful way to make that point. Compared to, say, looking at the average return by quintile.

[Anarch]

Compared to, say, looking at the average return by quintile.

Proportionate average return? Or absolute?

[Slartibartfast]

Terseness is the word of the day, given the circumstances.

So, go look.

[sidereal]

Well, as long as I'm disparaging arguments, Steve's isn't very good (assuming I read it correctly). Of course the tax rate has gone down. That's what a tax cut means. The point of the argument is that the wealthy have disproportionately benefited not only in absolute terms (number of dollars), but also in percentage terms.

But the more I think about it, the more I think there's no there there. The distribution of incomes within a quintile will have a big impact on that quintile's contribution to the total, and unless that massive amount of noise is adjusted for, I don't think you can draw any reasonable conclusions.

[Slartibartfast]

The point of the argument is that the wealthy have disproportionately benefited not only in absolute terms (number of dollars), but also in percentage terms.

I can't see that you can have higher rate benefit without more dollars being saved, can you? And of COURSE the wealthy are benefitting more. I thought that was intuitively obvious to the casual observer. When you cut the upper-bracket rates more than the middle-bracket rates, guess what?

[Timmy the Wonder Dog]

it's fairly straightforward analysis by the CBO, actually it makes a number of assumptions.

I'm just wondering did you read the report or just the media's comment on the report.

And I'm all for taxing wealth, even the wealth sheltered from the taxman (my favorite of course is the Ford Foundation, which pays no tax).