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Why the rich get the most tax goodies

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Most voters in the United States are middle class or poor. Yet Congress has given a small minority of citizens, the near-rich or rich, the bulk of the benefits from several years of tax cuts, thereby further aggravating income inequity in this nation.

How come, with elections every two years, Congress can apparently ignore the interests of the majority? After all, the rich have been getting richer, while the remainder of Americans have seen their incomes typically stand still in real terms for five years. Government also boosts the prosperous in other ways.

By now, surely most voters are aware that tax goodies have primarily gone to those at the top of the income ladder. But most are apathetic about it.

"Another year, another tax cut, and look who's cleaning up," was a May 16 headline in USA Today, reporting on the $69 billion tax-cut bill President Bush signed into law last week.

That latest tax cut gives an estimated 80 percent of the tax savings to the top 10 percent of taxpayers. Yet the rich are already paying a smaller percentage of their income in taxes than at any time in the past 75 years. True, they give Uncle Sam a lot of money. But that's because their earnings have grown much faster than those of the typical American.

According to the Bureau of Labor Statistics, the average weekly earnings in the US last month - when calculated in 1982 dollars - was $277. That's the same as in November 2001 when today's economic recovery began. In current dollars, the average weekly earnings were $565 last month.

The reason Congress doesn't spread tax savings around more evenly is that "people understand that poor people don't create jobs, and rich people do," says Republican economist Bruce Bartlett.

Moreover, people who earn less than $30,000 a year are unlikely to pay much, if any, income taxes, notes Mr. Bartlett, a former Treasury economist. His implication is that lower-income people could not care less what Congress does on taxes.

They do, however, pay substantial Social Security payroll taxes.

Jared Bernstein, an economist with the liberal Economic Policy Institute, uses two words to describe the conservative argument that tax cuts making the rich richer will grow the economy faster and therefore pay for itself in government revenues: "snake oil."

Mr. Bernstein cites economic studies indicating that, particularly in a time of federal deficits, tax cuts for the rich have no special economic benefit for the nation. Rather, they raise interest rates higher than they might otherwise be.


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