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Whose Tax Increase?

Just whom do U.S. President Bush and his chief economic advisor, Larry Lindsey, have in mind as the core constituency for their tax cut?

February 11, 2002

Just whom do U.S. President Bush and his chief economic advisor, Larry Lindsey, have in mind as the core constituency for their tax cut?

There is quite a debate in Washington these days about stopping or delaying the tax cut passed in 2001. In h is January 18, 2002 op-ed, Mr. Lindsey argued against taking such a step. He pointed out that “a farm family, small-business person or two-career couple with three children earning between $200,000 and $250,000 will face a 10 percentage point increase in his or her (sic) marginal tax rate.”

That’s not, mind you, a 10% increase in these particular Americans’ tax bill — but rather a 10% rise in the amount of taxes they would pay if they earned an additional dollar.

Here are some basic facts in the matter. The U.S. median family income as of 1999 was just $40,816. That amount is one-fifth of the amount at which Mr. Lindsey begins his assessment of the negative impact of a delayed tax cut. And just 12% of U.S. households had income greater than $100,000 per year.

Also consider this tantalizing fact: Of the 124,770,662 individual tax returns filed in the United States in 1998 (the last year for which such data is available), only 1.7% showed incomes greater than $200,000.

You’d be forgiven for thinking — based on the prominent position of family farmers in the list of tax cut beneficiaries — that the United States was still an agrarian society. In fact, just over 1% of all U.S. workers are self-employed in agriculture — and very few of those net a quarter million in income a year.

Even fewer have farms or businesses worth enough money to be subject to the inheritance tax.

And yet, in his sweeping call for tax rollbacks, Mr. Lindsey also manages to work a defense for the repeal of the inheritance tax into his piece. However, it turns out, once again, that the tax policy advocated by Mr. Lindsey benefits only a small portion of the taxpayers whom he mentions.

In other words, few of those “farm families, small business owners and two-career couples” to whom Mr. Lindsey refers are in the income tax brackets dear to his heart. Yet, he presents them as the only illustrations of Americans who would benefit from Mr. Bush’s tax cut.

From a political point of view, one might be tempted to think that such examples would be used by Democrats assailing the fairness of the tax cuts — but surely not by a Republican whose job it supposedly is to defend them!

There is another, even more peculiar explanation for Mr. Lindsey’s odd usage of statistical references. And that is this: from the Bush Administration’s point of view, only wealthy people matter.

That is certainly the message Mr. Lindsey is sending to the vast majority of farm families, small business owners and two career couples who don’t meet his lofty income levels.