Now that the Iraq war is over the national debate is returning to domestic issues. President Bush’s proposed tax cut has already been scaled back by Congress, and Democratic critics have renewed their complaint that even the pruned version “favors the rich.”

Of course tax cuts favor the rich; the rich in this country pay most of the taxes. The top 1 percent of Americans certainly does well in terms of income: this group takes in around 15 percent of total family income. Yet the richest Americans also pay an even larger share—nearly 30 percent—of total individual income taxes.
The top 5 percent of Americans earns nearly 30 percent of total family income, but pays 50 percent of the revenue that the federal government takes in from income taxes.

The top 10 percent of income-earners together pay a whopping two-thirds of all income taxes. So what about the poor? The bottom 20 percent of income-earners pay virtually no taxes: this group’s share of federal income taxes is around 1 percent. Indeed the bottom half of income-earners collectively pay less than 5 percent of income taxes.

These statistics are of obvious relevance in figuring out who is going to benefit from a tax cut. Consider the following example: If the rich guy makes $250,000 and pays $100,000 in taxes, and the (relatively) poor guy makes $30,000 and pays $3,000 in taxes, then a 10 percent across-the-board tax cut would cut the rich guy’s taxes by $10,000 and the poor guy’s taxes by $300.

This provokes the familiar cry, “But the rich guy is getting 30 times more than the poor guy.” One does not have to be a math major to figure out that it is not even possible to cut the poor guy’s taxes by $10,000 because he pays only $3,000 in the first place. Contrary to the demagoguery of the anti-tax-cut crowd, generally proportional tax cuts are just because they benefit citizens in proportion to what they have been paying in taxes.

Egalitarians should be pleased with the way in which our income tax code is basically designed to “soak the rich.” To take a relevant example, columnist Geoffrey Colvin of Fortune magazine has calculated how the cost of the Iraq war will be distributed among Americans. The average family, he notes, will have to pay around $625 for the war. But in reality, Colvin writes, the poorest fifth of Americans will pay only $33 apiece. By contrast, the top 5 percent of rich people will pay nearly $5000 each. What about the top 1 percent of income-earners? They will pay a whopping $13,000 each.

Unfair? Yes, unfair if anything to rich people! Critics of the rich never tire of pointing out that the rich are better off than they ever have been, although they usually neglect to observe that this is also true of the poor. Never before have poor people enjoyed a life expectancy exceeding 70 years, as they now do in America. Never before have poor people had amenities like cars and cable television. Never before has obesity been a problem for poor people, as it is now.

Moreover, never has the tax code been so biased in favor of the poor and the lower-middle-class and against the affluent. Colvin concludes, “Never in the past century have the rich paid more of the total federal taxes. And the poor have never paid a smaller part.” Let’s keep this big picture in mind when we hear bombastic nonsense about how tax cuts only benefit the wealthy and leave the little guy out in the cold.

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