Tom Teepen gives an excellent example of former British Prime Minister Benjamin Disraeli's charge that there are "lies, damned lies and statistics" in his editorial piece in the Steamboat Today of Aug. 17, 2004.
First of all, the rich have not gotten richer. According to the U.S. Census, average after-tax income for the top 20 percent of the income distribution fell to $143,743 in 2002, the last year of real data that we have, from $148,291 in 2001. The decline of 3.1 percent in income was larger than any other income group for 2002. In the Congressional Budget Office report that Mr. Teepen cites, average after-tax income for the top 20 percent of the income distribution fell to $133,700 in 2001 from $145,400 in 2000, a decline of 8.7 percent, again dramatically larger than the declines experienced by any of the other income segments.
Yes, the Bush income tax cuts were aimed at the rich, largely because it is only the rich who pay income taxes. While the top 20 percent did see an increase in their share of income rise from 45.5 percent to 52.4 percent from 1979 to 2001, an increase of 6.9 percentage points, their share of federal income taxes rose from 64.9 percent to 82.5 percent, an increase of 17.6 percentage points. By any measure, the rich paid more. Collectively, the bottom 60 percent of the income distribution only paid 3.2 percent of all federal income taxes paid in 2001.
There are many reasons to be critical of the Bush Administration's tax policies. Tax cuts were phased in over 10 years, as opposed to going into effect immediately, delaying any benefit they might have had. The cuts are all temporary, going away after 10 years, making tax planning all the more difficult. Too much of the tax reduction was aimed at income and not investment, encouraging consumption and not savings. Their distribution effects are far down the list.
If distributional equity is the highest goal of tax policy then Mr. Teepen has no room for complaint. In 2001, the share of income going to the top 20 percent dropped from 54.8 percent to 52.4 percent. One of the factors contributing to that drop is that the effective income tax rate for the top 20 percent was 17.6 percent more than twice the rate of any other group.