August 13, 2004


Tax Burden Shifts to the Middle (Jonathan Weisman, August 13, 2004, Washington 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 conclusions are stark. The effective federal tax rate of the top 1 percent of taxpayers has fallen from 33.4 percent to 26.7 percent, a 20 percent drop. In contrast, the middle 20 percent of taxpayers -- whose incomes averaged $51,500 in 2001 -- saw their tax rates drop 9.3 percent. The poorest taxpayers saw their taxes fall 16 percent.

The solution's obvious: cut the middle class by an additional 11%.

Posted by Orrin Judd at August 13, 2004 5:19 PM

So 21% of taxpayers are paying 83.7% of all taxes. And though the middle class is still paying a higher percentage of total income taxes, it's still 9.5% less than what they were paying individually. How exactly is this bad for the middle class?

Posted by: Twn at August 13, 2004 5:43 PM

His is bigger than mine!

Posted by: oj at August 13, 2004 5:49 PM

Hmm. It's impossible to argue with that logic. Drat!!

Posted by: Twn at August 13, 2004 6:13 PM

Figures don't lie, liars figure. Give me the right set of numbers and I can make them sing the Star Spangled Banner in C-Sharp Major.

CBO added FICA to income tax and discovered that low and behold, even though most of the income tax is being paid by the upper brackets, the total tax burden as so defined is skewed to the middle class because FICA is capped.

Of course if we say FICA is just a tax and past payments are irrelevant to future entitelments, just guess who will be leading the charge demanding that the premimums paid by americas proletariat be protected.

A more sophisticated analysis would be to take FICA as a tax only to the extent that it does not lead to an accrual of benefits. E.G. FICA paid by a capped-out persons such as myself is a tax, but not when paid by a person who is still accruing benefits. Unfortunately, such an analysis is probably some place between extraordinarily difficult and impossible. nor is it like to produce a useful sound bite. "New CBO study produces confusion, head scratching"

This issue is far from settled.

Posted by: Robert Schwartz at August 14, 2004 2:12 AM

We need to check how often this article mentions the Alternative Minimum Tax. ("That's a detail, merely a detail!" they'll rage.)

Liars can figure.

Posted by: LarryH at August 14, 2004 12:06 PM

Right on Larry and Robert and the liars are at it with articles in the MSM presenting deceptive statistics to overemphasize the differences. The choir knows the words and get to add emotions.

Posted by: genecis at August 14, 2004 12:32 PM