August 13, 2004
Report Finds Tax Cuts Heavily Favor the Wealthy
By EDMUND L. ANDREWS
WASHINGTON, Aug. 12 - Fully one-third of President Bush's tax cuts in the last three years have gone to people with the top 1 percent of income, who have earned an average of $1.2 million annually, according to a report by the nonpartisan Congressional Budget Office to be published Friday.
The report calculated that households with incomes in that top 1 percent were receiving an average tax cut of $78,460 this year, while households in the middle 20 percent of earnings - averaging about $57,000 a year - were getting an average cut of only $1,090.
The new estimates confirm what independent tax analysts have long said: that Mr. Bush's tax cuts have been heavily skewed to the very wealthiest taxpayers. [snip]
Since 2001, the federal budget has deteriorated from a surplus of more than $100 billion to a deficit expected to exceed $400 billion in 2004.
According to the new report from the Congressional Budget Office, about two-thirds of the benefits from the tax cuts, enacted in 2001 and 2003, went to households in the top fifth of earnings, with an average income of $203,740.
But the report also gave Republicans support for their contention that tax reduction had brought some benefit to people in almost all income categories. People with the bottom fifth of income, for example, averaging earnings of only $16,620, saw their effective tax rate drop to 5.2 percent from 6.7. Yet because lower- and many middle-income families had been paying very little federal income tax in the first place, those in that bottom fifth of earnings received an average tax cut of only $250.
"It doesn't matter who you are, the report shows that you are better off now than you were before the tax cuts,'' said a House Republican aide. "It's showing that everybody's tax burden has gone down as a result of the tax cuts.''
The tax cuts of 2001 and 2003 reduced tax rates for people in all income brackets. But they had a disproportionate effect on people at the very highest income levels because they had already been paying a disproportionate share of total federal taxes and in part because stock dividends got a special lower rate.
People in the very top income categories fared better by almost any measure, according to the report.The average after-tax income for people in the top 1 percent of income earners climbed 10.1 percent, while that of those in the middle 20 percent climbed 2.3 percent, and that of those in the bottom fifth only 1.6 percent.
Put another way, people with the top 1 percent of income saw their share of the tax burden drop to 20.1 percent after the tax cuts from 21.9 percent under the old law.
