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Gifts for all occasions in the Galleria! Subscribe to the "What is the Deal?" mailing list. The "What is the Deal?" Deal-of-the-Week: Receive $59 off any Last-Minute Weekend Getaway! August 15, 2004 What is the Deal with Math and Taxes? By Jan A. Larson The old adage says that there are only two sure things in life - death and taxes. Actually there are three sure things - death, taxes and when it comes to the subject of taxes, the Democrats can't do math. No sooner did a Congressional Budget Office report analyzing federal tax rates for the next decade hit the street than the mainstream press as well as Democratic presidential candidate John Kerry seized upon a tidbit on information from that report and proclaimed that the "burden of taxes has shifted from the wealthy to the middle class" and that the wealthy got a bigger tax cut than those in the middle class. I will examine the first issue shortly and as to the second issue, the only appropriate response can be, "duh!" It is time for the math lesson that Kerry apparently never received. I believe that most Americans understand that if taxes are cut by two percent, three percent or ten percent, the people that pay the most taxes will see the greatest savings terms of absolute dollars. Either John Kerry is trying to appeal to the dumbest among us that can't figure that out or maybe he hasn't figured it out. As to the issue of the middle class paying a greater share of the overall tax burden, there is much more in the report that must be understood before it is time for the oppressed middle class to jump on the Kerry bandwagon in search of tax relief. The report analyzes how federal tax rates change, under current law, over the next decade assuming that incomes grow at a constant rate and tax laws enacted under President Bush in 2001-2003 phase in, phase out and expire as they are presently scheduled. The most important point, one that Kerry failed to mention, is that the overall effective tax rate declined from 21.5 percent in 2001 to 19.6 percent in 2004. No matter how talking heads and politicians spin that figure, it is the essence of the Bush tax cuts. Americans are paying less money to the bloated federal government than they would otherwise be paying and that is good. As provisions of the tax laws expire in the coming years, the effective rate increases to 21.4 percent in 2005 and eventually up to 24.1 percent in 2014, not in small measure to the ever widening net of taxpayers subject to the Alternative Minimum Tax (AMT) and "bracket creep." The middle 20 percent of taxpayers will shoulder the burden of paying 10.5 of the total federal tax liabilities in 2004, compared to 10.4 percent, had the Bush tax cuts not been enacted (keeping in mind that this still represents a smaller tax liability in terms of cash outlay). The upper 20 percent of taxpayers would see their share fall to 63.5 percent (from 64.0 percent) in 2004. Naturally, the Kerry campaign used the increase from 10.4 to 10.5 for the middle 20 percent and the fall from 64.0 to 63.5 percent for the upper 20 percent as the basis for the charge of "tax burden shifting." Conspicuously absent from the Kerry analysis was the fact that for 2005, the middle class burden falls to 10.3 percent (compared to 10.4 percent without the Bush cuts) while the upper class burden increases to 64.3 percent (compared to 64.0 percent). The share of federal taxes paid by the middle 20 percent of taxpayers is the same or lower under current law than it would have otherwise been without the Bush tax cuts in all but two of the years (2004 and 2006) to 2014. This makes Kerry's argument especially weak. The bottom line is that Kerry's assertion that the Bush tax cuts were somehow unfair to the middle class is simply ludicrous. Everyone that pays taxes got a tax cut and some that formerly paid taxes were dropped from the tax rolls. The class warfare politics of the Kerry campaign is becoming tiresome to this writer, especially given that the "shots" being fired have little or no basis in fact. -- Send feedback to the author. The "What is the Deal?" column will appears weekly on the Pie of Knowledge website. Guest submissions are welcome and encouraged. To submit an article to "What is the Deal?" click here. To subscribe to the "What is the Deal?" mailing list and receive early notification when a new column is available, click here. The Pie of Knowledge will never, ever divulge email addresses to any third party for any reason unless so ordered by a court of law. Contributions to the Pie of Knowledge are greatly appreciated. 
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