News of the Day ... In Perspective05/15/2006
Tax cuts soak the rich
According to IRS data, the Bush tax cuts have shifted still more of America’s tax burden onto the backs of the wealthy. Between 2002 and 2004, tax payments by those with an adjusted gross income (AGI) of more than $200,000 per year, about 3% of taxpayers, increased by 19.4%, while payments by others increased 9.3%.
Between 2001 and 2004, the percentage of federal income taxes paid by those with incomes of at least $200,000 per year increased from 40.5% to 46.6%. The wealthiest 3% pay as much in taxes as the other 97% combined.
Despite, or because of cuts in the tax rate on capital gains and dividends, receipts between 2002 and 2004 climbed by 79% and 35%, respectively. What could be clearer evidence of the validity of the Laffer Curve (lower tax rates yield larger revenues)?
At the same time, the slice of the total income pie captured by the richest 1%, 5%, and 10% of Americans is smaller today than in the last days of the Clinton administration (Wall St J 5/4/06).
According to the Congressional Budget Office, the share of income taxes paid by the highest-earning 20% of Americans jumped from 65 to 85% between 1979 and 2003. The top 1% shouldered 35% of total income taxes paid. Meanwhile, the tax paid by the lowest two quintiles has fallen to minus 2% (Tom Patterson, Goldwater Institute 4/3/06).