Tax burden shifts to the middle...from a NON-partisan source....hmmmm

[reeds]

Tax burden shifts to the middle
New report could roil presidential campaignBy Jonathan Weisman

Updated: 12:04 a.m. ET Aug. 13, 2004WASHINGTON - Since 2001, President Bush's tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found, a conclusion likely to roil the presidential election campaign.

The CBO study, due to be released today, found that the wealthiest 20 percent, whose incomes averaged $182,700 in 2001, saw their share of federal taxes drop from 64.4 percent of total tax payments in 2001 to 63.5 percent this year. The top 1 percent, earning $1.1 million, saw their share fall to 20.1 percent of the total, from 22.2 percent.

Over that same period, taxpayers with incomes from around $51,500 to around $75,600 saw their share of federal tax payments increase. Households earning around $75,600 saw their tax burden jump the most, from 18.7 percent of all taxes to 19.5 percent.

The analysis, requested in May by congressional Democrats, echoes similar studies by think tanks and Democratic activist groups. But the conclusions have heightened significance because of their source, a nonpartisan government agency headed by a former senior economist from the Bush White House, Douglas Holtz-Eakin. Indeed, the study will likely stoke an already burning debate about the fairness and efficacy of $1.7 trillion in tax cuts that the president pushed through Congress.

"CBO is nonpartisan, it's independent, and right now it works for a Republican Congress with a former Bush economist at its head," said Jason Furman, economic director of the presidential campaign of Sen. John F. Kerry (D-Mass.). "There's no higher authority on the subject."

Girding for the study's release, Bush campaign officials have already begun dismissing it as "the Democrat-requested report."

"The CBO answers the questions they are asked," said Terry Holt, a Bush campaign spokesman. "To the extent the questions are shaded to receive a certain response, that's often the response you get."

Stark conclusions
The question posed was a standard request for analysis of the type members of both sides of the aisle routinely make of the CBO. In this case the ranking Democrats on the House Ways and Means Committee, the Senate Finance Committee, the House and Senate budget committees and the Joint Economic Committee asked Holtz-Eakin -- the former chief economist of Bush's Council of Economic Advisers -- to estimate the distribution of the tax cuts among income levels, and compare that to tax levels if none of the cuts were passed.

The conclusions are stark. The effective federal tax rate of the top 1 percent of taxpayers has fallen from 33.4 percent to 26.7 percent, a 20 percent drop. In contrast, the middle 20 percent of taxpayers -- whose incomes averaged $51,500 in 2001 -- saw their tax rates drop 9.3 percent. The poorest taxpayers saw their taxes fall 16 percent.

Republican aides on Capitol Hill, speaking on condition of anonymity, said the tax cuts actually made federal income taxes -- as opposed to total taxes -- more equitable.

They point to a different set of numbers within the CBO study that show that the rich are actually paying more in individual federal income taxes. If Social Security, Medicare and other federal levies are excluded, the rich are paying a higher share of income taxes this year than they would have paid with no tax changes, the CBO found. If none of the tax cuts had passed, the top 20 percent would pay 78.4 percent of income taxes this year. Instead, they will pay 82.1 percent. In contrast, the middle-class share of income taxes dropped to 5.4 percent, from 6.4 percent if no tax cuts had passed.

"Are the rich paying their fair share?" asked one GOP aide. "Yeah. They're paying more."

But to Democrats, the conclusion was clear. For the bottom 20 percent of households, the combined Bush tax cuts averaged $250 each. The middle 20 percent received $1,090, while the top 1 percent garnered $78,460, said Democrats on the Joint Economic Committee who analyzed the report.

Limits to analysis
The tax cuts this year will boost the income of millionaires by 10.1 percent, while middle-income families see a boost of 2.3 percent, the Democrats said.

Congressional Republican aides said that the CBO analysis has its limitations. For instance, it assumes that the beneficiaries of business tax cuts passed in 2002 and 2003 are the taxpayers who own stocks, bonds and other stakes in the businesses that received the reductions. But that analysis does not consider new workers hired because of the tax cuts, or higher wages that may have been granted because of the boost to the bottom line.

It also does not reflect that during the 1990s, the tax rates on lower-income households fell considerably due to an expansion of the earned income tax credit and other forms of low-income relief. In that sense, GOP aides said, tax cuts for the wealthy were overdue.

Besides, Holt said, looking narrowly at the distribution of tax cuts ignores the broader benefits -- such as investment, consumer spending, and job creation -- that flow from leaving more money in people's hands and which are spread far more evenly through the economy.

"Tax relief is about fairness, but it's also about economic growth," he said. "So the president's tax relief was both fair and effective, when it comes to bringing us from recession to growth."

But Republicans predicted that Kerry will make the report a major political event, and Furman said the results will be too stark to spin.

"This is the first really detailed government report that says not only did the wealthy get an enormous tax cut, but, if the conclusions are what we expect, the middle class will be left paying a larger proportion of the taxes than they were before," he said.


Kerry should POUND POUND POUND on this during the debates...Bush cannot deny the fact that his tax cuts clearly favor the rich, leaving the middle class towing the line....