Opinion Editorial | |
| Monday, February 15, 1999 | |
A Tax Cut For Those Who Pay Income Taxes |
After having rejected President Ronald Reagan's tax philosophy for the last four years, congressional Republicans have lately begun to revive it. The essence of his philosophy was that tax cuts should go to everyone, including the rich. He opposed targeted tax cuts that reward some taxpayers at the expense of others, and favored across-the-board tax rate reductions that benefit all taxpayers in direct proportion to the taxes they pay.
By contrast, since they took control in 1994, congressional Republicans have concentrated on exactly the sort of tax cuts Reagan opposed. This approach was epitomized by the $500 per child tax credit, which was designed solely to buy the votes of the Christian Coalition. Unfortunately, it didn't work. On Election Day, 1998, they were nowhere to be seen, leading to Republican loses.
Exit polls subsequently indicated that the main factor in Republican losses was the defection of high-income voters that were the backbone of the Reagan coalition. Those with incomes above $75,000, in particular, showed a sharp drop-off in support for Republican congressional candidates in 1998 over 1994. A major reason was the lack of any meaningful tax relief for this group in the 1997 tax bill.
Now Republicans claim to have learned from their mistakes and are pushing a 10 percent across-the-board tax rate reduction, instead of the gimmicky child credit that was the centerpiece of the 1997 legislation. However, true to form, some Republicans, like Florida Congressman Joe Scarborough, are already backing away from this plan, fearing liberal attacks that it only benefits the "rich." Predictably, the leftist Citizens for Tax Justice issued a press release on the very day the Republican plan was introduced showing that those with high incomes would indeed get a bigger tax cut than those with modest incomes.
But according to Congress's Joint Committee on Taxation, those with incomes below $20,000 pay no federal income taxes at all now, and in fact have a negative tax liability; that is, they receive a refund from the government even though they pay no taxes. This is mainly due to the Earned Income Tax Credit. There is no way to cut taxes for such people except by sending them bigger government checks.
As a consequence, those in the bottom half of the income distribution, with incomes below $23,160, paid just 4.34 percent of all federal income taxes in 1996 (see figure). By contrast, those with incomes in the top 25 percent, with incomes above $45,833, paid more than 81 percent of all income taxes. In short, an across-the-board tax rate reduction necessarily aids the well-to-do simply because they pay virtually all the taxes.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, February 15, 1999.
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