Editore"s Note
Tilting at Windmills

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June 4, 2003
By: Kevin Drum

MIDDLE CLASS TAXES....I read this last night in the Washington Post but didn't have time to blog it:

As critics of the tax cuts in 2001, 2002 and 2003 have noted, the very wealthiest Americans -- those earning $337,000 or more per year -- will be the greatest beneficiaries of the changes in the nation's tax laws. And, as administration officials have argued, low-income taxpayers will also enjoy a disproportionately lighter tax burden.

The result is that a broad swath of lower-middle, middle- and upper-middle-income people, as well as some rich Americans, will carry a greater share of the federal tax burden after the laws passed in the past three years are fully implemented. While taxes are scheduled to decline for all income groups, those earning more than $28,000 but less than $337,000 will end up paying a greater share of the taxes than they did before the changes.

This sounds right to me. Reducing taxes on the super-rich is part of the whole game plan, of course, and despite some of the rhetoric on the left there's also been tax reduction on the poor (although not in payroll taxes, which is their biggest burden). Reducing taxes on the poor helps shield Republicans from charges of coldheartedness and it also costs virtually nothing. So why not do it?

Of course, if you want to continue funding government, that means that, relatively speaking, you have no choice but to increase the share paid by the great middle class, and that's what's happening. I've published the chart on the right before, but I wish I could burn it into everyone's forehead: effective tax rates on millionaires have plummeted over the last 50 years while tax rates on the middle class have quintupled. I know a lot of people think this trend is just peachy, but I don't.

As the chart shows, reducing progressivity at the top income levels is apparently pretty easy, which makes this quote from the story priceless:

"It's hard to get a lot of progressivity at the very top," said R. Glenn Hubbard, the architect of Bush's most recent tax cut proposal and a former chairman of the White House Council of Economic Advisers.

Yeah, Glenn, that would be tough all right. You'd actually have to, you know, create a whole new tax bracket and assign it a higher rate. What a Herculean effort that would be....

Kevin Drum 10:00 AM Permalink | Trackbacks

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