In last week's column, I reported on the Washington, D.C.-based Tax Foundation's study that estimated that 44 percent of income earners will legally have no 2004 federal income tax liability. The study concluded, "When all of the dependents of these income-producing households are counted, there are roughly 122 million Americans -- 44 percent of the U.S. population -- outside of the federal income tax system."
The Bush administration sees removing the income tax burden on Americans at the lower end of the earnings spectrum -- families earning less than $50,000 a year -- as desirable. When President Reagan successfully got Congress to remove 6 million Americans from the tax rolls, he described his tax reform initiative as one of the proudest achievements of his administration. At the time, I argued that doing so was nothing to be proud about, and I extend that same criticism to President Bush.
You might ask, "Why?" In general, I've always held that a tax cut for anybody, at any time, for any reason is a good thing because it keeps more of our earnings in our pockets and out of Washington. But there's a problem. Removing so many Americans from federal income tax liability contributes to the political problem we're witnessing this election: class warfare and the politics of envy.
When 122 million Americans are outside of the federal income tax system, it's like throwing chum to our political sharks. These Americans become a natural spending constituency for big-government politicians. After all, if you have no income tax liability, how much do you care about how much Congress spends and the level of taxation? Political calls for tax cuts fall upon deaf ears. Survey polls reveal this. According to a Harris Poll taken in June 2003, 51 percent of Democrats thought the tax cuts enacted by Congress were a bad thing, while 16 percent of Republicans thought so. Among Democrats, 67 percent thought the tax cuts were unfair, while 32 percent of Republicans thought so. When asked whether the $350 billion tax-cut package will help your family finances, 59 percent of those surveyed said no and 35 percent said yes. Tax cuts to many Americans mean just one thing: They threaten the handouts they receive.
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