Occupy Wall Street has shined a spotlight on the “economic justice” discussion, while also making “fairness” something that politicians from both political parties are focusing on. Here’s something the Occupiers should be highlighting.
The Bush tax cuts, a colloquial phrasing for two large pieces of tax reform legislation passed in 2001 and 2003, cut taxes across the board for everyone. What many on the Left now complaining about economic inequality and tax fairness either won’t tell you or don’t know is that these pieces of legislation made the tax code more progressive.
This is very important. While it’s complicated to calculate average effective federal tax rates, the CBO has data dating to 2007, before the financial crisis, which has caused a little havoc with data. But check this out:
Poorest Americans have been the largest beneficiaries, on a percentage basis, of the Bush tax cuts. The lowest quintile went from a 6.4% average effective rate to a 4.0% average effective rate – a 40% tax cut. The top quintile went from a 28% to a 25.1% average effective rate – only a tax cut of 10%. Want a more regressive tax code? Repeal the Bush tax cuts!
That is sometimes what the Left advocates for. Washington Post blogger Ezra Klein made a hobbyhorse of pointing out that the budget deficit massively shrinks if Congress just fails to renew the rates put in place in 2001 and 2003. But what you won’t hear is that this is a flattening of the tax code, a regression of rates and a massive hike for middle- to low-income taxpayers.
Meanwhile, there have also been calls to repeal the Bush cuts only on upper-income earners. That’s a different proposal (one that wouldn’t get us very close to closing the deficit), but keep this in mind when someone next tells you that the main beneficiaries of the Bush tax cuts were rich people. It’s just not true.