With a gigantic IRS 1040 income-tax form covering a slightly ajar door presumably leading to a room filled with tightly guarded information, the headline of Newsweek’s current cover story screams: “The Dirty Little Secret of the Tax Cut: Why It’s Smaller Than You Think.” Inside, the article greets the reader with the bold assertion: “Why Your Tax Cut Doesn’t Add Up.” But the only thing that doesn’t add up is the article itself. It is replete with misstatements and distortions masquerading as the real-life experiences of Americans since President Bush’s tax cuts were enacted in 2001 and 2003.
The article showcases three middle-class families and includes photos of smiling children and parents, who invariably are quoted as saying they have derived virtually no benefit from the Bush tax cuts. All are utterly misinformed. Newsweek’s uncritical portrayal of their demonstrably false assertions amounts to nothing more than a reprehensible journalistic hit piece.
Newsweek first highlights “single-mom” Jennifer Evans and her 7-year-old son. Miss Evans earned $32,400 in 2003. “I kept hearing about these so-called tax cuts,” Miss Evans says. “They’re not benefiting regular working people,” she declared, a patently false assertion that Newsweek chose to emphasize by placing it in boldface type. In fact, Ms. Evans’ income tax was reduced by $1,000, or 45 percent. Specifically, she saved $500 from the new 10 percent bracket, which applies to her first $10,000 in taxable income (which had been taxed at 15 percent before Mr. Bush’s tax cuts). She saved another $500 after Mr. Bush doubled (from $500 to $1,000) the per-child tax credit.
Newsweek next featured the Taverno family (two parents and three children). Ron and Patty Taverno earned $73,411 last year. Newsweek reports that “they saved a few hundred dollars this year because the ‘marriage penalty’ [note the quotes] was eliminated.” Mr. Taverno boldly declares, “The tax cut to me was inconsequential” — which Newsweek dutifully placed in boldface. In fact, rather than just “a few hundred dollars,” the Tavernos saved $626 from the elimination of the marriage penalty. And they saved another $700 from the new 10 percent tax bracket, which applies to their first $14,000 in taxable income. And the doubling of the per-child tax credit cut another $1,500 from their tax bill. Altogether, the Bush tax cuts slashed more than $2,800, or 44 percent, from the Tavernos’ 2003 income-tax bill. This is “inconsequential”?
The Ellis family (two parents, two children) was next up. Ted and Erania Ellis earned $194,000 last year. “There’s been no break for us,” artist Ted tells Newsweek, which boldfaced the falsehood. “It feels like I’m being penalized for trying to run my own business. It doesn’t feel like they’re helping me. The tax cuts,” he ignorantly asserts, “are benefiting major corporations who are downsizing and outsourcing.”
Here’s the breakdown on our calculations: (1) The 10 percent bracket chopped off $700. (2) By increasing the standard deduction for married couples filing jointly by $1,650 to a level ($9,500) that is now a little more than twice the standard deduction ($4,700) for singles, the Bush tax cuts reduced the Ellis family’s taxable income by $1,650. Because the family now finds itself in the 28 percent tax bracket (thanks, by the way, to Mr. Bush’s 3-percentage-point reduction from 31 percent), this portion of marriage-penalty relief saved the Ellises $462 ($1,650 x 28 percent = $462). Also, by increasing the 15 percent tax bracket for married couples by $9,400 to a level ($56,800) that is now double the 15 percent level for singles, the Bush tax cuts sliced another $940 from the Ellis tax bill. Total marriage-penalty savings: $1,402. (3) The Bush tax cuts reduced the 31 percent and 28 percent brackets by 3 percentage points each. This reduced income taxes for the Ellis family by another $3,797. (4) Finally, doubling the per-child tax credit to $1,000 saved the Ellises another $1,000.
In total, the Ellis family will save $6,899 from its 2003 income taxes. That represents a monthly savings of $575. “There’s been no break for us,” Newsweek allowed Mr. Ellis to assert falsely, showcasing the lie in boldface, no less.
The dirty little secret is that Newsweek has published a dirty little story, which it surely had to know was filled with distortions and misrepresentations. Indeed, Newsweek actively contributed to these misrepresentations by boldfacing them.