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Talking Points: Tax Day

Since President Bush entered office, he has made tax cuts for the wealthy a focus of his domestic agenda. "These are the basic ideas that guide my tax policy: lower income taxes for all, with the greatest help going for those most in need," said Bush of his "bold and fair tax relief plan."

Since President Bush entered office, he has made tax cuts for the wealthy a focus of his domestic agenda. “These are the basic ideas that guide my tax policy: lower income taxes for all, with the greatest help going for those most in need,” said Bush of his “bold and fair tax relief plan.” But a majority of Americans will not feel Bush’s alleged tax relief today, as his tax scheme has disproportionately aided the wealthy, often at the expense of the poor and middle class. For example, in 2005, Bush’s tax changes allowed Vice President Dick Cheney to reap $1.1 million in tax savings, but households in the bottom fifth income bracket only received an average of $20 from the tax cuts in 2006. Dissatisfaction with the state of the economy was a major force driving Americans to the polls in November 2006, but Bush has still failed to deliver a fairer tax plan for Americans. “Despite major increases in outlays for war and security, the President and Congress substantially expanded the already unaffordable tax cuts in subsequent years. The fiscal and moral consequences of these blunders are staggering,” said Robert S. McIntyre, the Director of Citizens for Tax Justice

  • The Bush’s tax plan has concentrated wealth in the U.S. at record levels. “[T]ax rates faced by the wealthiest Americans have fallen, having also recently shown that the top 1% of American earners got a greater share of national income in 2005 than at any time since the 1920s.” Americans earning over $1 million receive an average annual tax cut of over $100,000, whereas middle income families earning between $26,000 and $45,000 receive about $650. A study by the Congressional Budget Office explains that the “growing concentration of income at the top continues a long-term trend.” “The share of after-tax income going to the top one percent rose from 12.2 percent in 2003 to 14.0 percent in 2004,” making that the largest one-year increase in the share of income going to the top one percent in 15 years. Now, the case for comprehensive tax reform is greater than ever.
  • Middle class and families are feeling the squeeze from the Bush tax plan. The Earned Income Tax Credit is “a refundable federal income tax credit for low-income working individuals and families,” originally approved in 1975 to offset taxes on the poor and provide incentives to work. But Bush’s 2001 tax plan cut marriage taxes across the board, except for within the EITC, causing “half of low-income married couples to have lower benefits.” At the same time, an increasing number of Americans will be in shock about the Alternative Minimum Tax (AMT) this year. “The individual alternative minimum tax was originally designed to limit tax sheltering and to assure that high-income filers paid at least some tax.” But Bush did not index the AMT to inflation and left it out of his tax changes; now it threatens to increasingly affect the middle class. “Unless the tax law is changed, some 23 million — 17 percent of all filers — will be subject to the AMT when they file in 2008,” in contrast to the 3.7 million facing the AMT this year. Rep. Rahm Emanuel (D-IL) called this “middle-class squeeze” from the AMT “the biggest tax increase on the middle class in the history of our country,” as “middle-class families making between $75,000 and $100,000 are now more likely to pay the tax than those making more than a million dollars.”
  • Corporations are getting a big break from fewer audits. Reports show that the Internal Revenue Service has been increasingly “unproductive” in corporate audits. “[T]he IRS is wasting more and more of the time of its revenue agents during a period when, because of limited resources, the agency is auditing many fewer corporate returns than it did only a decade ago,” according to to a nonpartisan research group. As a result, corporations get a hefty break. “The percent of large companies audited fell from 44 percent in 2005 to 35 percent in 2006, and the average number of hours per audit fell from 978 to 941.” The amount of money the IRS recommends for collection from these corporations dropped from $30.1 billion in 2005 to $25.5 billion in 2006. Simultaneously, the IRS is much more likely to audit the middle class. “Audits of these middle-class taxpayers rose to nearly 436,000 last year, up from about 147,000 returns in 2000,” tripling audits of tax returns filed by people making $25,000 to $100,000. Furthermore, the Government Accountability Office reported major security vulnerabilities in the IRS, “threaten[ing] the confidentiality, integrity, and availability of IRS’s financial and tax processing systems.” In turn, taxpayer information remains more vulnerable to “scams.”

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