Countering Myths About the Bush Tax Cuts

A new web memo published by The Heritage Foundation disputes the oft-repeated claim that the Bush tax cuts of 2001 and 2003 disproportionately benefited America's richest citizens. Using data from a report published by the Congressional Budget Office, Heritage says "...the tax cuts significantly increased the share of federal income taxes paid by the highest-earning 20 percent of households compared to their levels in 2000, President Clinton's final year in office."

I've previously posted that the top wage earners in this country pay more than 86 percent of all federal income taxes, and I've caught heat for it. Funny thing is, though, that numbers don't lie. Heritage says, "In 2006, the latest available year from CBO, the top 20 percent of income earners paid 86.3 percent of all federal income taxes, an all-time high. This is an increase of over 6 percent from 2000, when the top 20 percent paid 81.2 percent."

What about the rest of wage earners? The bottom 20 percent had their share of federal income taxes drop from negative 1.6 percent in 2000 to negative 2.8 percent in 2006. How can the number be a negative? Simple. The various credits available to low income earners often means that those at the bottom of the wage scale get back more money than was actually paid in. Their refund often exceeds the amount deducted from their paycheck. The next 20 percent's share dropped from 1.1 percent to negative 0.8 percent; the middle quintile's share went from 5.7 percent to 4.4 percent; and the fourth quintile's shared went from 13.5 percent to 12.9 percent.

As Heritage summarizes it, "The 2001 and 2003 tax cuts removed millions of taxpayers from the federal income tax roles, leaving only those at the top to pay the bill. They lowered every federal income tax rate and created a new 10 percent bracket to further reduce taxes for low-income earners."

What does Heritage think of President Obama's tax policies? According to the memo, "President Obama's tax policies would cause federal income taxes paid by the top 20 percent to increase and the shares of the remaining 80 percent to decrease even further. These policies include those passed as part of the stimulus legislation and those included in the President's Budget Blueprint."

The talking points sound good. Bush was a friend of the rich and an enemy to the poor. Unfortunately for his critics, the numbers don't support that claim.

http://www.heritage.org/Research/Taxes/wm2420.cfm