tax man15 Aug 2004
Bill Hobbs quotes Jeff Cornwall on the CBO report, possibly quoting this NRO piece? Or was he the original author, maybe?
Anyways, the post says:
While many characterize the CBO report as evidence that the tax cuts shifted the burden of taxation to the middle class, CBO data show precisely the opposite effect. The tax cuts actually made the tax system more progressive. The highest 20 percent of earners now pay a larger share of federal income taxes than they would have without the tax cuts, while the share of income taxes paid by all other income groups fell.
No. This is an incorrect conclusion based on a highly misleading assumption. As I have previously noted, simply choosing to ignore payroll taxes entirely doesn’t mean they don’t exist. Here is the relevant table for share of federal tax liability in general:
Under 2004, you can see what the media is talking about when they say the tax burdern was “shifted” to the middle class. The highest quintile took a -0.6 percent dip, while the 3rd and 4th quintiles went up 0.9 percent.
Mr. Cornwall, on the other hand, is looking at income tax alone. So, the CBO report doesn’t show “precisely the opposite” of a shift in the burden of taxation to the middle class. It shows something different if you ignore half of the tax structure that affects the lower quintiles the most. And believe me, you’d have to do a lot of ignoring to convince yourself that this report concludes that the tax structure is “more progressive”.
Further, as Brad DeLong notes, regardless of who the tax cuts favor, we need to be focusing as well on the “elephant in the living room”:
… that the deficits produced by these tax cuts are raising the national debt, that the national debt has to be serviced (unless we want to see the economy collapse into hyperinflation), and that the burden of servicing the national debt will raise taxes in the future. What we are talking about is not a tax cut, but a tax shift–a shift in taxes from today’s upper class to tomorrow’s middle class.