- The Washington Times - Tuesday, August 17, 2004

Republicans launched a counteroffensive yesterday against a Democrat-inspired Congressional Budget Office analysis, saying the study actually shows that President Bush’s tax cuts have reduced the overall tax burden for middle-income taxpayers.

Rebutting newspaper reports that said the CBO paper showed that the tax burden was shifting to the middle class, Rep. H. James Saxton, New Jersey Republican and vice chairman of the Joint Economic Committee (JEC), said yesterday that the distributional tax burden study demonstrates “the benefit of tax relief for all taxpayers.”

Congressional Democrats who asked CBO to conduct the analysis, whose findings were promoted by Sen. John Kerry’s presidential campaign, said the study showed that the share of taxes paid to the federal government was shifting from the richest Americans to middle-class families.

Actually, the CBO analysis flatly states that the Bush tax cuts have brought down the tax burden for all income groups, especially the middle class.

The Economic Growth and Tax Relief Reconciliation Act of 2001, which Mr. Bush signed into law, “lowered individual income taxes for all taxpayers,” the nonpartisan CBO staff of analysts said in the report.

Still, Republicans, fearing that press reports about the CBO paper could hurt Mr. Bush’s campaign, enlisted Mr. Saxton to put out a statement yesterday pointing to findings in the report that were ignored or played down by the press.

“The CBO study on effective tax rates shows the benefit of tax relief for all taxpayers,” Mr. Saxton said. Among key findings:

• The Bush tax cuts reduced middle income taxes this year “as a share of income from 5.2 percent to 3.5 percent, a decline of 1.7 percentage points relative to the share that would be paid under 2000 tax law,” Mr. Saxton said.

• “The data in the report indicate that the tax savings for a middle-income household amount to nearly 2 percent of income, or about $1,000 for a household with $53,000 of income, under 2004 tax law instead of 2000 tax law,” he said.

• Other congressional analysts and outside taxpayer groups argued yesterday that CBO’s analysis of which income groups pay the largest share of all taxes paid was to some extent distorted by the Democrats’ guidelines for the study. “They lumped all of the taxes into the study, including Social Security and other non-income taxes, that distorted its findings,” said Bill Ahern, spokesman for the bipartisan Tax Foundation.

Nevertheless, these analysts said the Bush tax cuts have done nothing to change the fact that those in the higher tax brackets pay most of the federal income taxes.

“With the bottom 40 percent paying no income tax, that leaves the top 60 percent to pay it all, and CBO data shows that the lion’s share is being paid” by taxpayers in the top 20 percent, said Scott Hodge, who runs the Tax Foundation.

Former CBO Director Robert Reischauer thinks that the differences in the total income tax burden have not changed much.

“A lot of ink is being spilled about modest shifts in relative tax burdens,” he said yesterday. “Virtually all taxpayers benefit to some degree from the tax cuts over the past three years.”

Other tax analysts say that what hasn’t changed much, if at all, is the Internal Revenue Service’s breakdown of which income groups pay the largest share of all income taxes.

According to the JEC, the wealthiest 1 percent of taxpayers pay 33.89 percent of all federal income taxes paid; the top 5 percent pay 53.25 percent; the top 10 percent pay 64.89; the top 25 percent pay 82.90 percent; and the top 50 percent of income earners pay 96.03 percent.

Everyone else in the bottom half, people making $28,528 a year or less, pay 3.97 percent of all federal income taxes paid, the JEC said.

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