WSJ's Moore selectively cited IRS data to deceptively assert "the federal income tax burden has substantially shifted onto the backs of the wealthy"

››› ››› ROB MORLINO

Stephen Moore selectively cited Internal Revenue Service statistics in order to buttress his assertion that "[i]n the aftermath of the Bush investment tax cuts, the federal income tax burden has substantially shifted onto the backs of the wealthy." In fact, the reason that the total share of income tax paid by those making more than $200,000 increased between 2002 and 2004 is that the number of people earning at least that much increased substantially, as did the average income of people within that bracket. However, filers earning at least $200,000 actually paid an average of 4 percent less federal income tax in 2004 than they did in 2002, even though their average incomes increased 10 percent during the same period.

In a May 4 op-ed titled "How to Soak the Rich (the George Bush Way)," Wall Street Journal editorial board member Stephen Moore selectively cited Internal Revenue Service (IRS) statistics in order to buttress his assertion that "[i]n the aftermath of the Bush investment tax cuts, the federal income tax burden has substantially shifted onto the backs of the wealthy." Moore cited figures showing that the portion of total federal income tax paid by Americans with adjusted gross incomes (AGI) of more than $200,000 increased between 2002 and 2004 while, conversely, the portion contributed by Americans earning less than $200,000 decreased during that time period. That does not mean, however, that the tax burden "shifted onto the backs of the wealthy"; the reason that the total share of income tax paid by those making more than $200,000 increased between 2002 and 2004 is that the number of people earning at least that much increased substantially, as did the average income of people within that bracket. As a group, filers earning at least $200,000 paid an average of 4 percent less federal income tax in 2004 than they did in 2002, even though their average incomes increased 10 percent during the same period.

Moore also noted that the tax share paid by Americans earning $1 million or more increased from 16.9 percent in 2002 to 17.8 percent in 2003 to further support his assertion that the richest Americans are paying more of the total income tax paid. Again, Moore ignored the fact that the number of Americans reporting the highest incomes has risen at a substantially larger rate than that of all Americans earning less, according to IRS figures. Between 2002 and 2004, the number of Americans reporting incomes of $1 million or more increased by 40.2 percent, while the number of Americans reporting incomes of less than $1 million increased by only 1.7 percent. Among those filers earning at least $1 million, average income tax paid decreased 8 percent while average income rose 10 percent. At the same time, average income tax paid by Americans earning less than $200,000 decreased 7 percent while their average incomes rose 4 percent.

While the percentage of federal income tax paid by Americans earning $200,000 or more increased from 40.5 percent to 46.6 percent between 2001 and 2004, as Moore noted, the amount of income reported by Americans in that bracket also increased at a significantly greater rate than the incomes of Americans earning less than $200,000. From 2002, the last year before President Bush's tax cuts on income earned on capital gains and dividends, through 2004, the most recent year for which IRS data is available, the total taxable income of Americans earning $200,000 or more increased 38.7 percent, while incomes for all Americans earning less than $200,000 increased by 5 percent during the same period. Therefore, the gap in the share of federal income tax paid by those making more than and less than $200,000 did not expand at the same rate as the gap in incomes between those two groups, meaning that the tax burden has actually been shifting away from these taxpayers rather than to them as Moore stated. In addition, the number of Americans reporting an AGI of $200,000 or more increased by 24.5 percent between 2002 and 2004, whereas the number of Americans reporting income of less than $200,000 increased by 1.3 percent, according to the most recent data supplied by the IRS.

An April 5 New York Times analysis noted that IRS data through 2003, the first year with complete IRS data following Bush's tax cuts, taxes on incomes of $10 million or more decreased by an average of approximately $500,000.

From Moore's May 4 Wall Street Journal op-ed:

With the House and Senate preparing to vote on extending George W. Bush's investment tax cuts, it's no surprise the cries against "tax giveaways to the rich" grow increasingly shrill. Just yesterday Senate Minority Leader Harry Reid charged that the Bush tax plan "offers next to nothing to average Americans while giving away the store to multi-millionaires" and then fumed that it will "do much more for ExxonMobil board members than it will do for ExxonMobil customers."

Oh really. New IRS data released last month tell a very different story: In the aftermath of the Bush investment tax cuts, the federal income tax burden has substantially shifted onto the backs of the wealthy. Between 2002 and 2004, tax payments by those with adjusted gross incomes (AGI) of more than $200,000 a year, which is roughly 3% of taxpayers, increased by 19.4% -- more than double the 9.3% increase for all other taxpayers.

Between 2001 and 2004 (the most recent data), the percentage of federal income taxes paid by those with $200,000 incomes and above has risen to 46.6% from 40.5%. In other words, out of every 100 Americans, the wealthiest three are now paying close to the same amount in taxes as the other 97 combined. The richest income group pays a larger share of the tax burden than at anytime in the last 30 years with the exception of the late 1990s -- right before the artificially inflated high tech bubble burst.

Millionaires paid more, too. The tax share paid by Americans with an income above $1 million a year rose to 17.8% in 2003 from 16.9% in 2002, the year before the capital gains and dividend tax cuts.

From an article in the April 5 edition of The New York Times:

The first data to document the effect of President Bush's tax cuts for investment income show that they have significantly lowered the tax burden on the richest Americans, reducing taxes on incomes of more than $10 million by an average of about $500,000.

An analysis of Internal Revenue Service data by The New York Times found that the benefit of the lower taxes on investments was far more concentrated on the very wealthiest Americans than the benefits of Mr. Bush's two previous tax cuts: on wages and other noninvestment income.

When Congress cut investment taxes three years ago, it was clear that the highest-income Americans would gain the most, because they had the most money in investments. But the size of the cuts and what share goes to each income group have not been known.

As Congress debates whether to make the Bush tax cuts permanent, The Times analyzed I.R.S. figures for 2003, the latest year available and the first that reflected the tax cuts for income from dividends and from the sale of stock and other assets, known as capital gains.

Posted In
Economy, Taxes
Network/Outlet
Wall Street Journal
Person
Stephen Moore
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