Chafee Votes Against Progressive Tax Cuts
As had been predicted, Senator Chafee voted against the reaffirmation of President Bush’s tax cuts. Meanwhile, the Congressional Joint Economic Committee has discovered that lower taxes are actually more “Progressive”:
Debate over changes in the tax code often focuses on who benefits most from such changes. Most of this debate hinges on tax distribution tables that measure the impact of tax law changes on the tax liabilities of various income groups. However, many newspaper articles and think tank reports fail to consider the current progressivity of the existing tax code when discussing the benefits of tax cuts for various income groups.
For example, it is important to note that up to 40 percent of federal income tax filers cannot receive further tax relief because these taxpayers do not in effect pay federal income taxes. Millions of families, many in the bottom fifth, have either zero tax liability or receive a net transfer from the government due to the refundable portion of the Earned Income Tax Credit (EITC) and/or the Child Tax Credit (CTC).
In addition, millions of people do not earn enough to file a tax return. Hence, these nonfilers, plus many of those that file tax returns in the bottom fifth, do not actually pay federal income taxes and, due to the refundable portion of the EITC and/or the CTC, many do not in effect pay payroll taxes.
The top one percent of tax filers paid 34.27 percent of federal personal income taxes in 2003, while the top ten percent accounted for 65.84 percent of these taxes. To be counted in the top one percent, taxpayers needed an Adjusted Gross Income (AGI) of $295,495 or more. The 2003 AGI cut-off amount for the top ten percent was $94,891, while the cut-off amount for the top/bottom fifty percent was $29,019. Again, it is important to note that many returns in the bottom half report zero or negative federal income tax liability.
These IRS data illustrate the steeply progressive nature of the federal income tax. Further, data on the number of non-filers, tax shares and the number of taxpayers effectively paying zero federal income taxes must be considered before any valid distributional evaluation of various income tax proposals or legislation can be made.
Couple this with the established fact that tax revenues have increased since President Bush’s tax cuts were implemented (as they have in the past) and I’d say that current tax policy is a Progressives dream!