NCPA - National Center for Policy Analysis

Opinion: Treasury Defining Down The Rich

July 15, 1997

Political observers say the Treasury Department -- in an effort to make it appear GOP tax cuts favor the rich -- has whipped up a measurement it calls "Family Economic Income" (FEI) which purports to show that more than two-thirds of the cuts go to the richest one-fifth of the population

The controversial measurement has sparked a raging debate in Washington.

  • Republicans say that nearly three-quarters of their tax cuts go to workers earning between $20,000 and $75,000.
  • They claim the administration is cooking the books by adding potential income such as unrealized capital gains and "net imputed rent" -- the income homeowners might have if they could rent their homes to others -- to boost millions of middle-class families into the ranks of the affluent.
  • Treasury's unconventional income measurement also adds in such things as employer-provided fringe benefits and tax-deferred interest on pensions, IRAs and other savings, producing substantially different results than those of the Census Bureau.

Bruce Bartlett, an economist with the National Center for Policy Analysis, says the FEI "creates a distorted picture for policy makers" and that the average taxpayer "doesn't have a clue as to where he is on those tables."

But, critics lament, Treasury's tactic is working. More than half those questioned for a USA Today poll said the GOP plan favors "the rich."

Source: John Merline, "Does GOP Really Favor the Rich?" Investor's Business Daily, July 15, 1997.


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