"Life Cycle" Analysis of Bush Tax Plan
January 15, 2003
Critics of the Bush tax plan consider it heavily weighted towards the rich, but conservatives note tax breaks for low-income and middle-income families have been expanded in numerous ways over the past 20 years, which is why the lowest-earning half of all households pays only 4 percent of all taxes.
"I don't know anybody who disagrees with the general proposition that over time fewer and fewer people are paying any income taxes, and that is the result of conscious policy decisions," said Bruce Bartlett, a senior fellow with the National Center for Policy Analysis and a longtime advocate of supply-side economics.
Glenn Hubbard, chairman of the Council of Economic Advisers, argues that the distribution of tax benefits needs to be seen through the prism of "life-cycle" analysis.
- Put simply, the idea is that many people naturally jump from one income level to another as they progress through their careers.
- The people who earn the least today are not necessarily the people who will still be at the bottom 10 years from now.
"It is important to recognize the mobility of taxpayers across tax brackets," Hubbard said in a speech last month. It is normal, he said, for people to begin their careers in low-income jobs, rise into higher brackets and then fall back again when they reach retirement. Their incomes can surge and fall back as a result of business successes and stock market losses.
Source: Edmund L. Andrews, "Fight Looms Over Who Bears the Tax Burden," New York Times, January 14, 2003.
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