A More Progressive Tax Code

If we take many congressional Democrats and left-leaning pundits at their word, they truly believe that accelerating President Bush’s tax cut would unfairly help the richest Americans at the expense of the poorest. Senate Minority Leader Tom Daschle (D-S.D.) and New York Times columnist Paul Krugman remain convinced, it seems, that the President’s proposal is inherently regressive. In fact, it’s just the opposite. Under Bush’s plan, households making over $100,000 per year would pay a larger share of the total federal income tax than they do now. What’s more, some 3.8 million lower-income taxpayers would be removed entirely from the income tax rolls, thanks in large part to the President’s increase of the child tax credit. In other words, the Bush proposal would ensure that nearly 4 million underprivileged Americans no longer have to pay any income taxes. Percentage-wise, those in the “0-$30,000” income bracket would get, on average, a 17 percent tax reduction, while those in the “$200,000-plus” bracket would get a 11.2 percent reduction.

Leading Democrats and their editorial comrades on West 43rd Street might argue, of course, that Bush’s tax cut would still return more money—in total dollars—to “the wealthy” than it would to “the poor.” Before using this as evidence of an unjust boon to the rich, however, they ought to consider statistics released by the Internal Revenue Service (IRS) in October 2002.

According to IRS data for calendar year 2000, the top 5 percent of wage earners in the United States pay 56.47 percent of all federal income taxes, the top 10 percent pay 67.3 percent of all income taxes, and the top 50 percent pay a whopping 96.09 percent of all income taxes. Since the top income-earners bear such an overwhelming portion of the federal tax burden, it stands to reason that they’d get more money back in a tax cut. After all, the government cannot return money in the form of tax breaks to people who don’t pay any taxes in the first place.

Moreover, the top 50 percent of wage earners already pay disproportionately more in taxes than they earn as income: the top 5 percent earn 35.3 percent of all income but pay more than 56 percent of all income taxes; the top 10 percent earn 46.01 percent of all income but pay more than 67 percent of all income taxes; and the top 50 percent earn 87.01 of all income but pay more than 96 percent of all income taxes. For those who have bought into the Democrats’ strident rhetoric and divisive rich-versus-poor strategy, these numbers may be quite surprising. Indeed, it’s also worth remembering just who some Democrats consider to be "rich." As it stands today, the U.S. Tax Code is exceedingly progressive by any measure. Bush’s plan, which the President forcefully advocated in Tuesday night’s State of the Union address, would make it even more so.

—Duncan M. Currie is an editorial editor.