The Tax Cut for the Rich Mantra

On the Democratic side, you will consistently hear echoes after echoes that the Bush Tax Cut was for the "rich". But was it?

The tax cut bill of 2001 actually benefited the lower 2/3's of tax payers "more" than the upper 3rd. The lowest tax bracket saw a one-third reduction from a 15% tax rate to a 10% tax rate. The next bracket up (lower middle class) was reduced from 28% to 15%; a 53% reduction in rates. The middle class tax break was from 31% to 25%; a 33% reduction. The upper two tax brackets went from 36% and 39.6% to 33% and 35%; respectively. So, the rich "only" saw tax reductions of about 9% for the former 36% and 39.6% tax brackets.

Additionally, tax payers with children saw the child tax credit double from $500 to $1000. Since, typically, wealth generally comes late in life (after the children have left the nest) and because, for whatever reason, the poor and middle class have more children than the wealthy, this tax adjustment clearly benefits the bottom two-thirds of the tax payers.

Those that argue that the tax cuts were for the rich like to point to the reductions in Estate taxes which do not benefit the poor and middle class. But reduction of those taxes do stop the wholesale slaughter of family owned businesses that have, over the years, resulted in the bisecting of farm land to pay estate taxes; and, the sell-off of business and their inventories to payoff the tax burden. Take, for example, a farmer who owns land and equipment that is now worth one million dollars, but took a lifetime of work to pay off the loans needed to achieve that supposed wealth. Under the old estate tax system, everything over $750,000 was subject to a minimum of 38% in taxes. That meant that at the death of the primary holder of that property, the surviving spouse was saddled with a tax bill of nearly $100,000. In a good year, that farm may have made a taxable profit of $100,000. In a bad year, it could have lost that much. So, having an estate tax bill of $100,000 puts that farmer's family in the position of having to sell off much of their land to pay the tax. That then reduces their income potential, and, typically, they have no other choice but to sell the entire, life-long, business to pay the tax. In the case of farmers, the land is usually sold off to massive Corporate farmers. The net-net of that is that the jobs are also lost because the big corporate farmer is more efficient.

Additionally, those who "chant" the mantra of the "tax cuts for the rich" like point to the 2003 law which cut capital gains rates from 20% to 15%. Also, the top dividend rate for Stock and Bond holders was reduced from 20% to15%. It is true that this does benefit the rich directly. However, more than 50% of this country's population is, at the very least, indirectly benefited by these cuts. For example, the various employee unions benefit because their pension funds are invested in securities such as stocks and bonds. And, those union operations that avoided taxable investments can, now, look at other stocks and bonds that pay dividends because the rates are lower.

Always overlooked is the fact the the Bush tax cuts reduced the number of workers who were actually eligible to pay taxes. In fact, about 10 million workers and retirees no longer have to pay taxes because the minimum eligibility for paying income tax was raised above their income levels. Those people just fell off the tax rolls and no longer pay "any" taxes under the Bush tax cuts.

The Bush tax cuts reversed a recession that he inherited from President Clinton, That recession was exacerbated by the events of 9/11 which just knocked the economic stuffings out of this country. Those tax cuts have been able to consistently reduce the budget deficit since they were implemented; and, this is despite the fact that our Congress has spent nearly 45 percent more in the last 7 years than when Bush took office. A fact that probably resulted in the loss of both Houses of Congress for the Republicans.

Tax cuts work. That is why both the Democrats and the Republicans are trying to give every tax payer in this country a rebate of about $1200. And, what is a tax rebate? Just another "tax cut" done after the fact!