ABOUT THAT MIDDLE-CLASS SQUEEZE

March 5, 2008

Democrats seem unable to stop themselves from promoting higher taxes for the wealthy and lower taxes for the poor.  But if the public knew the facts, their rhetoric would have no resonance, says Investor's Business Daily (IBD).

The poor in America pay virtually no taxes at the federal level. What taxes they do pay have been falling for decades:

  • The total effective federal tax rate -- for income, payroll and excise taxes -- for the bottom 20 percent of U.S. households was halved from 1979 to 2005.
  • From 2000, the year before President Bush took office, to 2005, after his tax cuts had fully kicked in, their total effective federal tax rate fell by nearly a third.

At the other end of the scale:

  • The total effective federal tax rate for the top quintile fell by a mere 7.3 percent from 1979 to 2005 and by 8.9 percent from 2000 to 2005.
  • If you look at households with children, the difference is even more stark -- for the top incomes, taxes have risen, while those at the bottom saw a whopping 85.7 percent cut.

Don't think that the poor's tax burden has been passed to the average American family:

  • The total effective federal tax rate for the middle quintile has fallen faster than the top two quintiles.
  • The effective tax rate for middle-class Americans has fallen since the late 1970s.
  • While that was happening, the median after-tax household income jumped by more than a quarter.

With taxes down and incomes up, we're all doing better, says IBD.

Source: Editorial, "About That Middle-Class Squeeze," Investor's Business Daily, March 4, 2008.

 

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