Today’s Hill article on a Tax Foundation study of the effects of the expiration of the Bush tax cuts caused a stir after Republicans spread it far and wide because of its headline — “Study: Expiration of Bush tax cuts will hit poorest hardest.”
It’s a great line for GOP rhetorical purposes, but it obscures the value of the report. It’s not big news that raising taxes right now would be bad for the poor — if one believes that raising taxes in a recession will hurt the economy, it should follow that raising taxes will especially hurt the poor. Anything bad will have an outsized effect on the poor. One recent example that drew a lot of commentary: the recession has led to far worse unemployment and underemployment among the poor than among higher income earners. And the disproportionate impact on the poor is invoked to support almost every policy issue — erratic weather caused by climate change will plague the poor most, a lack of health insurance affects the poor most, etc.
At some point, people are going to realize that to be poor is to lack security from all these bad outcomes.
So it’s not news that growth-killing tax hikes will hurt poor people. What is news (or what I think would be news to most people) in the Tax Foundation study is that the Bush tax cuts included a number of designed measures to aid poorer workers, most of which fixed small problems in the tax code, but ended up being significant in the aggregate. From the report:
While many people view the Bush tax cuts as targeted towards the wealthy, taxpayers across the entire income spectrum received a significant tax cut. It’s certainly true that wealthier taxpayers received a bigger cut as measured in dollars because they were paying higher taxes to begin with. However, a better measure of tax cuts is the percentage change in after-tax income, which reflects tangible lifestyle benefits and is intuitively understood.
Comparing changes in after-tax income shows that the benefits of the tax cuts were distributed much more equally along the income spectrum because the Bush tax cuts included a number of provisions targeted specifically at low-income people.
The report goes into some detail about what those provisions are, specifically.
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