Lighter Tax Burdens for the Rich: Novak vs. Bush

Supply-side cheerleader Bob Novak complained yesterday that the Congressional Budget Office had produced “political fodder for Democrats” by reporting how Bush’s tax cuts have reduced the share of taxes paid by the rich. Novak offered a surprisingly accurate description of the CBO report:

That study concluded that President Bush’s cuts had shifted more of the tax burden from the nation’s rich to the middle class, though everyone enjoyed an income tax reduction.

Naturally the Bush campaign was upset, Novak writes, and they offered a different interpretation, emphasizing a different set of figures from the CBO report:

Taken by surprise last week, the Bush-Cheney campaign tried to recover by putting together a conference call for journalists and trying to beat the Democrats at the class warfare game with this message: Had no tax cuts been enacted, the top 20 percent of federal income-tax payers would have paid 78.4 percent, but the actual figure, because of the cuts, amounted to 82.1 percent.

So, the Bush campaign says the CBO report is favorable to the Republicans, and shows that the tax system has gotten more progressive. Novak says the CBO report is favorable to the Democrats, and shows that the tax system has become less progressive. I think I may see a contradiction there.

Novak being Novak, he ignores the contradiction. Instead he calls for the CBO to produce numbers more favorable to the Republicans!

The Bush campaign is just adopting their usual tiresome spin, spouting figures that are technically true, but calculated to be misleading. They speak about federal income taxes, and hope that listeners will assume they’re talking about total federal taxes. The Bush campaign’s selective figures ignore all the rest of federal taxes including corporate income taxes, excise taxes, and payroll taxes. They ignore estate taxes too (but so does the CBO).

If you look at all federal taxes, the CBO finds, the upper middle class is paying a bigger share of taxes because of Bush. The 60th to 80th percentiles are bearing an additional seven tenths of a percentage point of the federal tax burden (see the table at the end of this post). There hasn’t been much of a change for those in the bottom 60%. The top 20% did pretty well, paying a share six tenths of a percentage point smaller after Bush’s tax cuts.

The big action, though, is in Bush’s “base,” the very wealthy. The top 1%, with incomes averaging about a million dollars per year, saw their share of federal taxes fall from 21.9 percent to 20.1 percent, a drop of 1.8 percentage points. They’ve certainly been getting their money’s worth.

Share of Total Federal Tax Liabilities, 2004

Income Average 2000 Current
Category Income Tax Law Law Change
---------- -------- ------- ------ ------

Lowest 20% 14,900 1.3 1.1 -0.1
34,200 5.4 5.2 -0.2
51,500 10.4 10.5 0.2
75,600 18.8 19.5 0.7
Highest 20% 182,700 64.0 63.5 -0.6

Top 10% 259,000 48.7 47.6 -1.1
Top 5% 379,800 37.4 35.9 -1.5
Top 1% 1,050,100 21.9 20.1 -1.8

Source: CBO.

UPDATE: A commenter points out that I misstated the list of taxes included

in the CBO study. I’ve corrected this.