It Was a Tax Hike for the Rich, Not a Tax Cut

A lot of people claim that the 2003 tax bill was a "tax break for the rich," including Paul Krugman of the NY Times. (Do an advanced Google search for Paul Krugman and the phrase "tax cuts for the rich" and you'll get 29,000 hits. Do it for George Bush and you'll get 182,000 matches.)

Not true, according to several recent studies released by the government, and reported in today's WSJ:

According to the IRS annual study of income tax data, just released for 2004:

• Americans who earned more than $1 million in adjusted gross income paid $178 billion, or an average of $740,000 per filer, in income taxes in 2004.
• That's a 33% increase in taxes for that group since 2002, the year before the 2003 tax cuts in marginal income-tax and dividend and capital gains rates.
• The wealthiest 1% paid almost 37% percent of all individual income-tax payments in 2004, up from 34.27% in 2003.

Meanwhile, a separate report from CBO that tracks monthly tax collections shows that tax revenues keep increasing. In the first two months of Fiscal 2007 through November, tax revenues climbed by 9% compared to the previous year, and this is on top of the increase in tax revenues of 15% in 2005, and 12% in fiscal 2006. The federal budget deficit is down to 1.8% of GDP -- lower than the average for the last 25 years.

Bottom Line: It wasn't a "tax cut," it was a tax increase in revenues. And it wasn't a "tax cut for the rich," it was a "tax hike for the rich." Tax revenues are at an all-time high, and "the rich" are paying more than ever, what's to complain about?