As we go into the next round of budget negotiations, it seems quite clear that the Democrat response to every effort to cut spending will be to propose ways to raise revenue, usually by trotting out their well-worn battle cry “repeal the Bush tax cuts!” That will then be followed by describing them as “tax cuts for the rich” which redistribute wealth from the poorest Americans to the wealthiest. But is this true? Are the rich really the largest beneficiaries of the tax structure implemented in 2001 and 2003 by George W. Bush, and who would bear the brunt of additional taxation if the Bush cuts were repealed?
To find out the answers to these questions, all I needed was the handy calculator on my iPhone and a visit to the Tax Facts archive at the Tax Policy Center, which keeps records of all the tax rates and rules going back to the passage of the 16th Amendment.
The first fact which became clear on looking at the data is that the very rich were not the largest beneficiaries of the Bush tax cuts. In fact, their taxes were cut significantly less than the taxes of those in the lowest tax brackets. The top rate was cut by 4.6%, while the lowest bracket was split into three groups and the bottom two of those saw their taxes cut by a minimum of 5% and in many cases by as much as 18%. Those are far greater cuts than any of the higher brackets, even the top bracket.
In addition, with increased values for exemptions and deductions, many of the working poor and lower middle class saw much of their tax liability just eliminated completely. The Bush structure has raised the standard deductions and exemptions for an individual from $7200 to $9500, protecting an additional $2300 in income, which is a big chunk for someone with a low income, and that is high enough that no one in the lowest income bracket actually has any tax liability at all. If the Bush tax cuts were repealed a significant number of the poorest workers would owe 15% on that $2300 in income. Handing people earning below the poverty level a bill for $345 would be just one of the unpleasant consequences of repealing the Bush tax cuts.
So, let’s say that Democrats win this argument and decide to raise taxes. Yes, the rich would pay a little more which they can probably easily afford. But at the same time, almost 20 million people in the category which I would define as the lower middle class, who have gross incomes between about $35,000 and $43,000 (as individuals), would see their taxes increase by 13% if the Bush tax cuts were repealed. These people are the heart of working America and they are the people the Democrats claim to stand up for, but they would be devastated if the Bush tax cuts were actually repealed. They outnumber the members of the top bracket almost 5 to 1, and are much less able to afford a massive increase in their taxes.
So the next time you hear a Democrat politician talking about repealing the Bush tax cuts so that the rich will pay their “fair share,” remember that it was the poor who benefited the most from the Bush cuts, and that if they were repealed they would pay a very large and unfair additional share of taxes which they certainly cannot afford.