Monday, August 30, 2004

The Bush tax cuts and distributive justice 

There are a lot of reasons to criticize the Bush tax cuts, or at least some of them. But this table from the Detroit News does make it clear that the wealthiest taxpayers (the top 1%, 5%, 10% and 20%) are now paying a higher proportion of collected federal taxes than they were in 2000. Measured by cash accounting, the rich are shouldering a larger share of the total burden than they were under Clinton.

Yes, the top 20% "got the most" from the tax cuts in absolute dollar terms because they paid the most taxes in the first place, but that argument depends upon the silly proposition that all money belongs first to the government, which then disperses funds in the form of affirmative appropriations or "tax expenditures." In America, everybody but journalists, academic economists and leftist political activists believes quite the opposite -- that it is our money first, and the government takes what it needs to deliver security and essential services. That elected officials at every level of government use both appropriations and the tax code to buy votes is a bug, not a "feature," of American democracy.

Of course, the table in the Detroit News does not entirely dispose of the argument that the tax cuts "benefit" the rich. If, for example, the huge federal deficits that are at least partially attributable to the tax cuts lead to greater inflation, that inflation will land as a regressive tax on people with lower incomes (it is regressive because lower-income people spend a higher proportion of their total income than rich people, and inflation acts as a tax on consumption). Or future governments may conclude that the fiscal burden of the Bush tax cuts will require cuts in entitlements, which also tend to benefit people in the bottom 80% more than those in the top 20%. But those indirect burdens on the not-rich have not manifested themselves and are by no means inevitable.

CWCID: Glenn.


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