Credit where credit is due

Posted: Jan 13, 2003 12:00 AM
The Democrats are right. There is a class of Americans that doesn't pay its fair share, or anything approaching its fair share, of federal taxes. And now that group is about to get another tax break, thanks to President Bush's proposed stimulus package. But the Democrats are wrong as to who that group is. The group that doesn't pay close to its fair share is the bottom half of American workers, who collectively paid less than 4 percent of federal income taxes in 2000. Citizens for Tax Justice complains that the proposed Bush tax cuts -- which would reduce federal income taxes and eliminate taxes on stock dividends -- will net $289 for the average taxpayer this year, but more than $30,000 for the top 1 percent of taxpayers. Director Robert S. McIntyre complained that Bush apparently believes "the rich don't have enough money." Of course, the reason the Bush plan doesn't give more tax relief to low-income Americans is that they don't pay much, if any, in income taxes. That's even true of middle-income Americans. The top 25 percent of American earners paid 84 percent of federal income taxes in 2000; the top 1 percent paid 37.4 percent. As R. Glenn Hubbard, chairman of the president's Council on Economic Advisers, explained in a speech last month, "The income tax is paid almost entirely by the relatively well-to-do." And while the left bemoans that richies have been getting too big a break in income taxes in recent years, the percentage of federal income taxes they pay has grown steadily since 1970, when the top 1 percent of taxpayers paid 16.7 percent of the income tax tab. The House Dems' idea of fairness? An instant tax "rebate" of $300 per taxpayer. Said former Reagan and Bush economic adviser Martin Anderson: "The Democrats call it a tax credit, but it's (often) neither. They simply say that if you're not paying taxes, we'll give you money." That description, Anderson noted, fits giving $300 to people who don't pay income taxes, and also the Earned Income Tax Credit supported by many Republicans, as well. Am I suggesting that America raise taxes on poor and middle-income earners? Of course not. I wouldn't want to join the ranks of those who raise families on $30,000 or less, and who do pay payroll, excise and sales taxes. But I can't endorse a "rebate" that will drive up the number of voters who can clamor for bigger government, more programs and more "rebates," secure in the knowledge that only other people will have to pay for them. The Bush plan would eliminate the dividend tax, end the marriage penalty, increase child tax credits and lower taxes in all brackets. A married couple earning $40,000 with two kids would pay a mere $45 a year in federal taxes, according to an analysis the accounting firm Deloitte & Touche performed for The New York Times. If one parent loses a job and is deemed "likely to exhaust" unemployment benefits, Plan Bush would set aside $3,000 for training and support services. If mom or dad gets a job, Plan Bush would give to the parent what's left of the $3,000 as a "re-employment bonus." William Niskanen, chairman of the Libertarian Cato Institute, dismissed the Bushies' "Personal Re-employment Accounts" as "show business" and predicts they'll fail because they weren't thought through. No lie. On a conference call, Commerce Secretary Don Evans explained that the plan was "innovative" because "in the past, whenever you find a job, your unemployment benefits are cut off." Bingo, and that's because employed people don't need unemployment checks. If anything, Bush is cleaving too closely to the Clinton playbook.