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April 14, 2005
Evil Dr. Bush and his Tax Cut for The Wealthy
I recently saw yet another claim that Evil Bush's Tax Cut gave the "average schmo" $300 and saved "the wealthy" Billions and Billions.
Not all that long ago, I heard another individual saying "The average guy got one month's car payment on his Chevy, the Wealthy got a free brand new Lexus..." (Note: Not an actual quote -- those quote marks are really paraphrasemarks)
So, I decided to waste a half hour and do the research so that my rebuttal could be more accurate (and therefore meaningful). Here's what I found.
Let's assume for the sake of argument that the definition of "the wealthy" is any family who earns more than $320,000 per year. (I am using the "Married Filing Jointly" status for this comparison. There are significant differences (unmarried individuals can earn $320,000 before entering the highest bracket, but married couples can total no more than the same $320,000 -- or about $160,000 each))
Let's also assume that the "average schmo" is family earning, oh... $58,500 per year. (Remember, that's the couple's total, not the individual -- for this calculation, individual is $29,050)
I am using 1999 as the standard for "before the tax cut" and 2004 as "after the tax cut". For the purposes of this calculation, I am assuming income to be the taxable income, if only to simplify calculations. I am aware that there were a myriad of little credits and deductions added to the tax code in the last several years, and that ignoring them decreases the accuracy of my comparison.
Feel free to do more in-depth research to get more-accurate numbers.
The Wealthy:
in 1999, they earned $320,000 of taxable income, and were taxed as follows: (calc from the 1999 IRS Form 1040 Instructions)
Income over $283,150: Tax 90,200.50 + 39.6% of all income over $283,150.
$90,200 + (.396)*(320000-283150) = $104,793 in taxes.
In 2004, they earned the same $320,000:
Income over $319,100: Tax: $86,328 + 35% of all income over $319,100.
$86,328 + (.35)*(320000-319100) = $86,643
$104,793 - $86,643 = $18,150 in tax cuts, a 17% decrease in income tax.
That's right, the family earning $320,000/yr pays 17% less now than before! Let's check out our "average schmo" family.
1999:
If you make less than $100,000 you use the tax table instead of the rate schedule. In 1999, the tax table said married couples earning $58,500 in taxable income owe: $10,791
2004:
Same rules apply, in 2004 the married couple owed: $8,106.
That means the tax cut saved them
$10,791 - $8,106 = $2,685. This means that they owe 24.8% less tax today than they did before the tax cut.
That means the average couple saved over 24%, the wealthy couple saved about 17%. Not quite so unfair-to-the-average-schmo as you might think.
If you disagree with my definitions of average and wealthy, feel free to plug in your own numbers. I used these because they were near the cutoff points for different tax brackets, and I assumed that the government's definition of average and wealthy were based on those numbers.
---There will be an immediate response of "bah, percentages, average-guy saved under $3k, wealthy-guy saved over $18k!" to which I can only say, you can hardly consider it fair to decrease taxes on the average individual so far that they are being *paid* by the government...
— The Shelanman
Posted by andrew at April 14, 2005 01:43 PM
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