SYNOPSIS: Bush's tax cuts are an unabashed present to the rich
T here was a word missing from Al Gore's acceptance speech on Thursday. Not once did he describe his opponent's plans as "risky." He still warned about the size of George W. Bush's proposed tax cuts -- about $1 trillion larger than his own over the next 10 years. But Mr. Gore has apparently decided to emphasize his populism more than his prudence, accusing the Republicans of offering tax cuts that benefit only the rich. Is he telling the truth?
In a word: yes. Mr. Bush's proposed tax cuts aren't just tilted toward high-income families; they target them with awesome precision. Mr. Gore's own proposals are characteristically complex -- frankly, too complex for my tastes -- but their benefits would be much more widely spread.
Citizens for Tax Justice, a watchdog group, has produced some numbers that illustrate just how much Mr. Bush's plan would give unto those who already have. Around half the benefits would go to families with incomes of more than $250,000 per year; the average tax break for families in the top 1 percent of the income distribution would be 100 times that for families in the middle. Even a family making $80,000 a year would get less than $20 per week off its taxes once the plan was fully phased in; a family making $1 million would get $1,000 per week.
Mr. Gore's plan is much harder to figure out because it consists mainly of tax credits that depend on what you do, not on how much you make. Some of the tax credits, like those for college education, would still be related to income. But the dollar benefits would in general be no more for families making a million dollars than for those making a tenth as much, and the biggest proportional benefits would probably go to families at or below the middle.
So whatever you think about the details of Mr. Gore's plan (and boy, are there a lot of details!), his characterization of the difference between the plans seems fair. How, then, can the Republicans -- who do, after all, need at least a few votes from the bottom 95 percent of the income distribution to win this election -- answer the charge that they only care about the rich?
Their traditional answer has been to emphasize the supply-side incentives -- to insist that reducing taxes on the rich will give people more reason to become rich, and that these increased efforts will benefit everyone. But we haven't been hearing that argument much lately, probably because the economy is doing so well that it's hard to convince people that current tax levels are strangling the spirit of enterprise.
So now they are starting to play up another traditional argument -- the claim that you, too, could be a winner, that Americans move up and down the income distribution so frequently that it doesn't matter whose taxes are cut. Last week The Wall Street Journal cited -- not for the first time -- two old studies purporting to show that people who are currently in the bottom 20 percent of the income distribution are not only unlikely to stay there; after 10 or 15 years they are more likely to be in the top 20 percent than in the bottom. Never mind that both studies were ridiculed by serious experts for their obvious (and obviously intentional) procedural errors as soon as they came out. As Kevin Murphy of the University of Chicago put it, those people who supposedly went from the bottom to the top were basically guys who worked part time in the college bookstore, then had real jobs by the time they were 30.
The reality -- documented by a number of other studies that The Journal for some reason chose not to mention -- is that while most Americans will move up or down the income distribution over the course of a decade, most won't move very far. In fact, even in America your parents' social class, though it doesn't determine your own, affects it strongly. (Is this news to Mr. Bush?) If a tax plan won't help you much today, it probably won't help you much 10 years from now.
Appearances, then, are not deceiving. This really is a choice between one tax plan that, whatever else you may say about it, would go mainly to the middle class and one that focuses like a laser on the very, very well off.
Originally published in The New York Times, 8.20.00