By Linda Lutton
But the numbers on my screen got me wondering what this letter from the IRS was going to say. The Democrats tried to stop the letters from going out on the grounds that–besides being a waste of $33.9 million in taxpayer money (more now, since the government messed up on its calculations and told a half million mostly lower-income people they were getting more than they are–gotta send those folks another letter with the bad news)–they were partisan and promotional, to wit: “Thanks to the Congress of the United States and President George W. Bush,” your check is in the mail. (It could have been worse. How about a PS suggesting people keep the letter with their voter registration cards?)
“The CBO’s projection isn’t a description of what the budget surplus would be under current policy. It’s a projection of what the budget surplus would be if government programs were radically cut, to levels not seen since the 1950s or earlier. That may be what some politicians want, but it is not the way the projections are being interpreted by the public,” he writes.
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Remember Bush’s “tax families”? Those “typical” photogenic, middle-income families of four earning $40,000 a year for whom Bush’s tax plan represented an annual tax savings of $1,600? “Barely one-tenth of the nation’s families would actually get as much as that ‘typical’ tax cut,” writes Krugman. A single adult with the same income, a family with grown children, a family that hasn’t had children yet, and a family that earns less would all get less. Krugman points out that a family of four earning $30,000 currently pays $750 in income taxes. Under Bush’s plan that family would no longer pay anything in income tax, but would still be responsible for more than $5,000 in payroll taxes. (Eighty percent of us pay more in payroll taxes than we do in income taxes, by the way. In fact, most Americans either pay no income tax at all or are in the 15 percent bracket.) “The families displayed by the administration are carefully chosen to make the tax cut look good,” writes Krugman.
In addition to Bush’s marketing ploys, Krugman knocks down “urban legends” about the federal budget that, however false, seem engrained in the public’s mind-set and almost certainly affect our thinking about taxes and government. That family that had to sell the farm to pay estate taxes? “Only a few percent of the estates that pay taxes include a family business,” writes Krugman. “Furthermore, the existing law gives family businesses and farms special treatment…. Real-life cases of small businesses or family farms that must be sold to pay estate taxes are very rare.” But repeal of the estate tax–which Krugman characterizes as a tax on the “very, very rich”–accounts for nearly a quarter of the total tax break.
He notes that before Bush took office, the U.S. Treasury Department provided detailed information about the projected effects of proposed tax law changes on different income groups. Prior to the 1994 Republican takeover of Congress, the House Ways and Means Committee did the same. “Both now refuse to provide those calculations to the public,” writes Krugman, who says it’s been suggested that treasury secretary Paul O’Neill be forced under the Freedom of Information Act to reveal what his staff knows. The numbers the Treasury Department did release, says Krugman, are a “classic demonstration of ‘how to lie with statistics.’”
Of course, the rebate checks aren’t all there is to the tax cut. In fact, it was the Democrats who first proposed the rebate–though their original proposal would have given $300 to every man, woman, and child in America. (That would have been $1,200 for my family instead of $0.) But Krugman wrote earlier this month in the New York Times, “For four out of five American families, according to the Joint Committee on Taxation, this year’s rebate is most of what they will ever get from the Bush tax cut.” A decade from now, when the tax cut is fully phased in, the 60 percent of us now making less than $44,000 a year will get 15.3 percent of the benefits of the tax cut–an average savings of $347 per year. That’s 29 bucks a month, 95 cents a day–not enough to pay for cable TV. Or, if you’re among those who think the poor are poor because they spend their money on frivolous things like cable TV (though it’s a stretch to call 60 percent of the population poor, isn’t it?), the $347 isn’t enough to cover a single month’s rent even in a subsidized apartment (which won’t be subsidized for long after this cut goes into effect).
