The Tax Foundation on Bush’s Tax Plan

This is a nice little piece that points out some flawed logic critics of tax cuts sometimes use.

Since President Bush released his $674 billion tax cut plan, a blizzard of numbers have swirled around Washington about how various income groups will or will not benefit from the plan. The January 12 edition of Time Magazine contained a typical presentation of these competing numbers:

"Although Bush touted the fact that the average tax bill would shrink $1,083, almost half of all filers would get reductions of less than $100, according to the left-leaning Center on Budget and Policy Priorities."
The reason this statement is misleading is that the people who make up "almost half of all filers" owe almost no income taxes to begin with. Indeed, this year, 35.7 million tax filers (representing 69.6 million people) will have a zero tax liability. That is 26.7 percent of the roughly 133 million expected tax returns this year.

In 1996, by contrast, 29.4 million filers (24.5%) had a zero tax liability. This means that the 1997 tax cuts and the 2001 tax cuts (EGTRRA) removed 6.3 million filers from the tax rolls.

Tax Foundation economists estimate that should the Bush plan be enacted, it would increase the number of tax filers with a zero tax liability by 3.8 million, to 39.5 million. Of these new zero tax filers, 3 million are families who are taken off the tax rolls because of the expansion of the child credit from $600 to $1,000 per child. Because of the large number of dependent children claimed on these returns, the total number of people represented by returns with zero tax liability will rise from 69.6 million, to 82 million, an increase of more than 12 million people.

Nearly 40 million people now have zero tax liability. Why don't you ever hear that on the news?

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