Tax burden shift seen as lopsided

Conservative economists, while pleased that President Bush has cut taxes, are concerned that he is shifting a disproportionate share of the tax burden onto affluent Americans.

“The president’s tax cuts have made the tax code more progressive,” said Joshua Bolten, director of the Office of Management and Budget, as he revealed Mr. Bush’s 2006 budget on Monday. “Those at the upper end of the spectrum are now paying a larger share of the income tax than they were before.”

The trend was not welcomed by Stephen Moore, president of the Free Enterprise Fund.

“One of the mistakes that we as Republicans have made over the last 20 years — and this goes back to Reagan — is we continue to take more and more Americans off the income tax rolls entirely,” Mr. Moore said.

“If you look at the bottom 50 percent, people below the median income, they are only paying 3 or 4 percent of the income tax burden — and the bottom third pay almost no income tax,” he added. “When it comes to democracy, that’s a dangerous thing.”

Heritage Foundation senior economist Daniel Mitchell agreed.

“If we wind up creating a society where the bottom 50 percent of the population pays no tax, and in effect government becomes free for them, we could very much gravitate toward becoming a European-style welfare state,” Mr. Mitchell said.

“That’s because a majority of the population concludes that it can live off a minority of the population that’s actually paying the bills,” he added. “So I do worry about it.”

So does Grover Norquist, president of Americans for Tax Reform.

“There is a danger that if only 5 percent of the population is paying half the income taxes, some people think income tax increases don’t affect them,” he said. “They will be indifferent to those taxes.”

More than half of all income taxes are paid by the top 5 percent of income earners, or those making at least $140,000 a year, according to Mr. Bolten.

“Without the president’s tax cuts, that top 5 percent would be paying less than 52 percent of our total income tax revenue,” he said. “After the president’s tax cut, that group is paying more than 54 percent of our total tax revenue.”

According to the Internal Revenue Service, the top half of income earners in America pay more than 96 percent of all income tax. And the majority of the bottom half pay no income tax at all.

If this trend continues, the United States could eventually face dire consequences, Mr. Mitchell said.

“So many people have been taken off the tax rolls in Europe that they wind up supporting these welfare state policies that cripple European economies,” he said. “And I don’t think we want to go down that path.”

An increasingly progressive tax code also raises a fundamental issue of fairness, Mr. Moore added.

“You’ve got people voting on government programs and how much government should spend, but a large percentage of them don’t have any stake in the game because they don’t pay any federal income taxes,” he said.

“But it’s also true that politically, sometimes to get the top rates down, which is what’s so important, you have to cut the taxes at the bottom even more. … This is an argument for why we should have a flat tax,” he added. “Then everybody’s sort of in the same boat.”

His sentiments were echoed by Mr. Norquist.

“The reason why you want everyone paying 10 percent is so the politicians treat everyone equally and don’t divide the population into different groups,” he said. “The problem with any sort of progressive or graduated income tax, and the problem with many tax credits, is that you’ve divided the electorate into different groups, and then a clever politician can mug them one at a time.”