In recent days, backers of George W. Bush's proposed tax rate reduction have been running advertisements featuring John F. Kennedy supporting his 1963 tax cut. This has brought forth a predictable response from the Kennedy family, which has denounced the ads and argue that Mr. Kennedy would oppose the Bush plan were he still alive. That may or may not be true. But what is indisputable is that the Kennedy tax cut, enacted in 1964 after his death, was as much of a tax cut for the rich as Mr. Bush's.
In his tax message to Congress in 1963, Mr. Kennedy asked that the top income tax rate be brought down from 91 percent to 65 percent. His goal was to reduce all statutory income tax rates by about 30 percent, including a reduction in the bottom tax rate from 20 percent to 14 percent. Subsequently, Congress only reduced the top rate to 70 percent. Nevertheless, this constitutes a significantly larger tax cut than Mr. Bush's proposal to bring the top rate down from 39.6 percent to 33 percent. The law passed by a Democratic Congress in 1964 lowered the top rate by 23 percent, while Mr. Bush's plan would only lower it by 17 percent.
Looking at how the tax cut affected people at different income levels, the largest reduction in taxes went to those with adjusted gross incomes between $50,000 and $100,000. That is equivalent to an income of $300,000 to $600,000 today. People in this bracket got a tax cut equal to 4.3 percent of their income. Those at the top of the income distribution, with incomes over $1 million, equal to $6 million today, got a tax cut of 3 percent. By contrast, those at the bottom of the distribution, with incomes below $5,000, saved only 2.5 percent.
Senator Ted Kennedy, Democrat of Massachusetts, who was elected to his brother's Senate seat in 1962, twice voted in favor of lowering the top income tax rate from 91 percent to 70 percent in 1964. He and President Kennedy's daughter Caroline now charge that the Kennedy tax cut was less tilted toward the wealthy than is Mr. Bush's. They say this: "Only 6 percent of President Kennedy's tax cut went to those earning over $300,000 in today's dollars. The Bush tax cut gives them seven times that amount, an irresponsible 43 percent."
It is true that those with incomes above $300,000 in today's dollars got about 6 percent of the total Kennedy tax cut. However, the analogy to the Bush plan is not valid.
What the Kennedys are trying to do is equate the top 1 percent of taxpayers today with the top 1 percent in 1962. But they have made a mistake in assuming that incomes are distributed the same way today as they were in 1962. Today, an income over $300,000 in adjusted gross income would put someone into the top 1 percent. The equivalent income of $50,000 in 1962, however, put one into just the top 0.2 percent; that is, the top two-tenths of 1 percent. To be in the top 1 percent in 1962, one only needed an income of $25,000. Those with incomes above this level got 14 percent of the Kennedy tax cut.
Moreover, the comparison that the Kennedys are making to the Bush tax cut is flawed for several reasons. First, the 43 percent figure (actually 45 percent) comes from a leftist group called Citizens for Tax Justice that uses a definition of income different from that upon which the Kennedy tax cut figures are based. Under CTJ's definition of income, one needs $373,000 to get into the top 1 percent.
CTJ also includes in its analysis the estate tax. They treat it as if it is paid annually out of one's income, rather than from assets at death. Since Mr. Bush plans to abolish the so-called death tax, this makes the tax cut for the wealthy seem much bigger than it actually is. A recent Treasury Department analysis of the Bush tax bill, using a definition of income comparable to those for the Kennedy tax cut and excluding the estate tax, found that 25.4 percent of the benefits would go to those with incomes above $200,000. Since this is an income level below the cutoff for the top 1 percent, the benefits for this group would be less.
Thus an honest comparison between the Kennedy and Bush tax cuts would conclude that they are more alike than the Kennedy family would like to believe. The share of the Bush tax cut going to the top 1 percent is about 21 percent -- 50 percent larger than this group got under the Kennedy tax cut, but nowhere near the 7 times larger that the Kennedy family charges.
The important point here is that once upon a time, in the not-too-distant past, there was a Democratic president who was not obsessed with class warfare, as today's Democrats are. He was willing to cut tax rates for all taxpayers, including those at the very top of the income distribution. Today's Democrats don't actually want to cut taxes at all. They only want to send out government checks to people who don't pay income taxes and call them tax cuts, while denying tax relief to those who pay the vast bulk of the federal government's bills.
As recently as 1981, there were still Democrats around who thought like John F. Kennedy. One was a congressman from Detroit named William Brodhead. Although a self-professed liberal, backed by organized labor, he argued that Ronald Reagan was mistaken to phase-in his reduction in the top tax rate from 70 percent to 50 percent, because the people affected by the top rate are those who make the investments that create the jobs. Said Mr. Brodhead, "We have to reduce taxes on wealthy people to have more investment."
With polls showing strong support for a tax cut, and deteriorating economic conditions, it appears that a major tax cut this year is a certainty. If Democrats want to have some say in how the bill is shaped, they are going to have to give something. They should follow Mr. Brodhead's lead and press for an immediate reduction in the top rate from 39.6 percent to 33 percent, not phased-in over five years as in the House-passed bill. This would instantly change the terms of debate and put enormous pressure on Republicans to respond by supporting Democrat efforts to give more relief to those with low incomes.