NCPA - National Center for Policy Analysis

Daschle's "Lexus" Remark Turns Out To Be Wheels-Off

February 19, 2001

Senate Minority Leader Tom Daschle recently said of the proposed Bush tax cut that taxpayers in the Top One Percent -- making $300,000 or more a year -- could take the money from their tax cut and buy a Lexus. A taxpayer making $50,000 could only buy a muffler for his used car. Business writer Scott Burns decided to find out if Daschle was right.

The least expensive Lexus, without options, had a sticker price of $30,995. How much Lexus does a tax cut buy? It depends on your income:

  • Currently, the tax bill rises from $5,560 for a nonitemizing couple making $50,000 (11.1 percent of income) to $87,918 for a $300,000 couple (29.3 percent of income) -- meaning people who make more money pay more taxes.
  • So, even if you take the $50,000 earner off the tax rolls via a 100 percent tax cut, the $5,565 savings wouldn't even be enough to buy some of the options packages -- simply because those taxpayers don't pay enough taxes.
  • The $300,000 taxpayer, currently paying $87,918 in taxes, would need a 35 percent tax cut to buy the cheapest Lexus -- but the proposed tax cut would only give him about $8,000 when phased in.

Daschle later said he meant to refer to the average earner in the top one percent of taxpayers, who makes $900,000 a year. So, if the $300,000 couple can make an extra $600,000, they will pay an additional $198,000 in taxes (at 33 percent), which would be $39,600 less than they would have paid before the tax cut. That's one Lexus.

The government, meanwhile, would get almost $200,000 more in revenue - enough for a small Lexus fleet.

Source: Scott Burns, "Lexus Idea Is Tough To Drive Home," Dallas Morning News, February 18, 2001.


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