US Income Tax System Remains Progressive, Leading Senators Counter

by Mike Godfrey, Tax-News.com, Washington

19 August 2004

Three senior Senate lawmakers have rallied to the defence of tax cuts passed under George W. Bush’s presidency, arguing that the media has misinterpreted the recently released CBO study by wrongly assuming the tax system has shifted the burden from the wealthy to the middle class.

In a joint statement, Senators Chuck Grassley, Don Nickles and Robert Bennett (chairmen of the Senate Finance Committee, Senate Budget Committee and Joint Economic Committee respectively) observed:

“Taken together, the tax cuts of 2001, 2002 and 2003 made the income tax system more progressive, so wealthy taxpayers pay a higher share of federal income taxes.”

“Thanks to this legislation, middle income families pay a lot less income tax, and an additional 15 million low-income taxpayers will owe no income tax at all. That’s a record 44 million low-income taxpayers in 2004, up from 29 million in 2000,” they added.

According to the Senators, the media response to the release of the CBO’s study failed to accurately report a key fact affecting the tax data for 2004 that concerns accelerated bonus depreciation provisions to help small businesses.

“The Congressional Budget Office allocates the bonus depreciation provisions to high-income taxpayers under the assumption that they will in effect receive the benefit,” reads the statement.

However, by focusing on the 2004 data when the provisions are increased, the lawmakers argue that the true picture painted by the CBO report has been missed.

“The real picture is this. High-income taxpayers had a comparable reduction in tax burden to middle-income taxpayers due to the Bush tax cuts. And, wealthy taxpayers generally are paying a greater percentage of all federal income taxes than they were before the 2001, 2002 and 2003 tax cuts,” the Senators pointed out.

“This change makes the income tax system more progressive,” they concluded.

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