True to form, opponents of Congress’s $800 billion tax relief plan are playing the “class warfare” card in a last ditch attempt to stir public sentiments against the plan. To prove their case, they point to figures showing that the tax cut package will deliver many times the tax relief to upper-income families than to lower-income families.
But what these critics intentionally fail to show is: (1) the amount of taxes paid by each family before calculating their tax cut; (2) the amount of taxes they pay after receiving their tax cut; and, (3) the percentage of their tax burden that is erased by the tax cut. Why? Because this information clearly shows that Congress’s tax cut plan is fair by any standards.
The chart below compares the amount of income taxes now paid by a family of four at different levels of income to what the same family would pay after receiving marriage penalty relief and a one percentage point tax rate cut (these two provisions comprise half of the overall tax plan). For example, a family earning $40,000 per year now pays $2,270 in income taxes while a family earning $200,000 per year pays $36,569 in taxes. Congress’s plan would give a tax cut of $414 per year, an 18 percent reduction, to the family earning $40,000, while giving a tax cut of $2,774 per year, or 7.6 percent, to the family earning $200,000.
Naturally, an upper-income family’s tax cut will be larger in dollar terms than what a lower-income family receives. But even after getting such a “large” tax cut, a family earning $200,000 per year will pay 18 times more in taxes than a family with one-fifth the annual income.
Even the most ardent class warriors should be content with such a disparity.