Poor get biggest percentage cut, rich get biggest dollar cut under Reagan plan
Mike and Mary Meager, a fictitious married couple with two children, live at the poverty line, with an annual income of $11,457. Under the Reagan tax plan, the Meager family would no longer pay federal income tax. That would save the Meagers $393, or 100 percent of their 1986 tax bill, under existing law. And the family would get a $254 rebate check, thanks to an expanded low-income tax credit that the Reagan tax plan proposes.
Ronald and Nancy Reagan, a real-life married couple with no children living at their large Washington home, had a 1984 income of $440,657.
Under the Reagan tax plan, the first family's 1986 tax bill on that income would drop $28,373, or 19 percent.
These two families' finances highlight several facts about the fairness of the Reagan administration's tax reform plan.
First, the nation's most needy citizens get the largest percentage cut in their tax bills of any income group. Second, those with incomes over $200,000 get the biggest dollar savings. Middle- and upper-income individuals get smaller percentage savings than either the richest or poorest citizens.
The fairness of these outcomes is in the eyes of the beholder. The President says the big tax cut he and other wealthy taxpayers would get ``just points out for everyone how advantageous the new tax system is.''
Treasury Secretary James A. Baker III argues that upper-income taxpayers who have been paying high taxes ``ought to get'' relief. He notes that wealthy individuals who have not been paying taxes will find that shelters will ``not be anywhere near as available'' under the Reagan plan.
Critics, like New York Gov. Mario Cuomo, calls the Reagan plan ``dynamite for the rich people.'' The Democratic governor adds that ``people in the middle suffer.''