Bush’s tax cuts add up to zero

President Bush’s two major tax cuts in 2001 and 2003 have removed nearly 4 million taxpayers from the income tax rolls, so that nearly 30 percent of all income-tax filers pay nothing.

Thanks to the 2001 $1.35 trillion tax cut and last month’s $350 billion tax cut, 39.6 million families will have no income tax liability in 2003, according to numbers by the Tax Foundation and Citizens for Tax Justice.

Such families owe nothing because they don’t earn enough to pay income taxes or because they will have more credits from government programs than they owe in income taxes.

The figures apply even before Congress acts on a bill to provide 6.5 million families, who are already off the tax rolls, with up to another $400 per child, bringing the total per-child tax credit to $1,000. The bill would extend the full $1,000-per-child credit to married couples making up to $150,000, eliminating the eligibility “marriage penalty.”

Yesterday, the Senate agreed to a conference to work out differences between the Senate-passed and House-passed tax credit bills. The House bill extends the tax credits for a longer period than the Senate bill.

The number of families that have fallen off the tax rolls has more than doubled since 1980, when there were 18.6 million — about 20 percent of those filing — who had no liability, according to numbers from the Tax Foundation.

“Every bill since at least 1986 has taken a few more million off the rolls,” said Chris Edwards, director of fiscal policy at the Cato Institute.

The threshold for filers who have no tax liability has also increased to where a family of four earning nearly $40,000 might well pay no income taxes, depending on the exact situation.

Income transfers happen through two basic credits: the per-child tax credit and the Earned Income Tax Credit. In 1999, the EITC transferred more than $31 billion to low-income families, according to IRS statistics.

But Robert S. McIntyre, director of Citizens for Tax Justice, said the Bush tax cuts haven’t done as much for low-income families, though they have done plenty for middle-income families, those in the middle quintile making between $28,000 and $45,000.

More than half of the families dropped from the rolls thanks to the Bush tax cuts — 54 percent — have come from that group. Another 26 percent were in the second-highest quintile, making between $45,000 and $73,000.

The tax cuts caused only about 100,000 families in the lowest quintile, with incomes below $16,000, to drop off the rolls, and just 500,000 families in the second-lowest quintile.

Now, 77 percent of those in the lowest-income quintile have no income tax liability, while 49 percent of those in the $16,000 to $28,000 group don’t pay income taxes. And even in the second-highest quintile, 7 percent of those making between $45,000 and $73,000 have no income tax liability.

Mr. Edwards of Cato said the number of families off the rolls has changed the politics of tax cuts.

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