May 26, 2001 05:44 PM | Permalink |
Click here to see this analysis in PDF format.
The tax plan approved by Congress on May 26, 2001 preserves the high-income tax cuts proposed by George W. Bush, but adds enough new tax breaks to make the final bill 20 percent more costly that the original Bush plan.
A distributional analysis released by Citizens for Tax Justice shows that when the tax plan is fully phased in:
- The typical tax cut for the median income taxpayer will be $600 a year.
- For the 78 million taxpayers in the lowest 60 percent of the income scale, the tax cut will average $347 a year.
- In contrast, at the top of the income scale the average tax cut will be $53,000 annually–virtually identical to the $54,000 annual tax cut proposed by the President.
“Congress has given the President what he truly cared about–gigantic tax cuts for the rich,” said Robert S. McIntyre, director of Citizens for Tax Justice. “But Congress reneged on its promise to honor fiscal responsibility. Instead of a tax cut one-quarter less in size than the President’s plan, Congress actually increased the fully-phased-in cost of the tax cuts by a fifth.”
“As a result, over the upcoming years, average taxpayers will pay dearly for this tax cut plan in reduced public services, a return to budget deficits or, most likely, both.”
To hide the true cost of the tax plan, Congress relied on slow phase-ins, artificial phase-outs and a redefinition of the ten-year budget period to include only nine years. “This is reminiscent of Bush’s campaign strategy of insisting that there are only nine years in a decade,” noted McIntyre. “Only if Bush’s education plan is a total failure are he and Congress likely to get away with this snake-oil approach to budget policy.”
Two tables and a graph showing the distributional effects of the tax plan and its predecessors follow. The analysis was performed using the Institute on Taxation and Economic Policy Tax Model.