Tax Plan’s Biggest Cuts Could Be in Living Standards
A decade ago or so, the nonpartisan Tax Policy Center and the liberal-leaning Center on Budget and Policy Priorities estimated that making the Bush tax cuts permanent — rather than letting them expire in 2010 — would increase the after-tax income of people earning $1 million or more up to 7 percent, an order of magnitude more than it would increase the size of the economy in the long term. The bottom 80 percent of American families, by contrast, would actually be worse off because they would bear the brunt of paying for the cuts.
Republicans’ current efforts are just as skewed. The Joint Committee’s analysis of an early version of the Senate Republican plan found that 10 years from now, millionaires would get a tax cut worth $8,500, on average. People earning $75,000 or less, by contrast, would experience a tax increase.
Adding in the cuts to Social Security, Medicaid, education and other programs that Republicans are planning to cull to pay for the tax reductions, the cost to poor and middle-income families would be even greater.
And this presents an immediate ethical problem. Students of the history of economic thought learn early on that taking money from the poor and the middle class to give to the rich tends to reduce overall welfare for the simple reason that an extra dollar provides much more to those who have few of them than to those already rolling in money. Most conventional proposals to increase general welfare support redistributing in the other direction.
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