By the richest Americans I mean people in the top 1 percent of the incomescale, where the average income is just more than $1 million. This year there are1.3 million families and individuals in that bracket. By 2010, the top 1 percentwill likely have about 1.4 million taxpayers, averaging $1.5 million a year.Every state has at least a few of these wealthy people, although most live injust eight states: California, New York, Florida, Texas, New Jersey,Pennsylvania, Illinois, and Michigan.
A new study by my group, Citizens for Tax Justice (CTJ), finds that from 2001to 2010, the richest Americans are slated to pocket almost half a trilliondollars from the Bush tax cuts enacted last year. The $477 billion in tax breaksthe Bush administration has targeted to this elite group will average $342,000each over the decade.
By 2010, when (and if) the Bush tax reductions are fully in place, anastonishing 52 percent of the total tax cuts will go to the richest 1 percent.Their tax cut windfall in that year alone will average $85,000 each. Put anotherway, of the estimated $234 billion in tax cuts scheduled for the year 2010, $121billion will go to just 1.4 million taxpayers.
If the American people will just focus on their own enlightened, patrioticself-interest, however, all this need not happen. The tax cuts for the rich arenot yet a done deal. To be sure, the rich have already received a hefty downpayment on their Bush tax cuts -- averaging just under $12,000 each this year.But 80 percent of their share of the bounty is scheduled to come from tax changesthat won't take effect until after this year, mostly from items that phasein after 2005.
Meanwhile, the vast majority of taxpayers have already received most of whatthey'll get. For the four out of five families and individuals that make lessthan $73,000 this year, three-quarters of the tax cuts -- averaging about $350this year -- are already in place. Tax cuts for the 19 percent of taxpayersmaking between $73,000 and $356,000 this year will grow a little over the nextfour years but will dwindle thereafter (see addendum). By 2010, the tax cuts forthis group will be no bigger as a share of income than they are now.
In other words, for 99 percent of us the tax cuts are already mostly or fullyfrozen. Only the very rich have a lot more to gain if future tax cut phase-insare allowed to continue. Everybody else, of course, has a lot to lose in thereduced government services and bigger deficits that further tax cuts willentail. How are we going to afford to defend our country and protect SocialSecurity, not to mention address pressing needs like prescription drugs forseniors, if so much of our tax money is siphoned off in giveaways to thesuperwealthy?
Obviously we can't expect President Bush to repudiate tax breaks for what hejovially calls his "base." But that's why we have elections. Freezing the taxcuts for the wealthy ought to be a key political issue this year and in 2004.
Addendum:
Policy wonks may recall that when CTJ previously analyzed the Bush taxcuts, we found that "only" 38 percent of the tax breaks were targeted to the top1 percent -- a statistic cited ad nauseam by Al Gore. Why does that percentagejump to more than half by 2010 in CTJ's new study? The answer was touched on inmy previous column: the exploding impact of the individual "alternative tax."
CTJ's earlier analyses measured the distribution of the Bush tax program as ifeach element were "fully effective" (and we presented our results in 2001dollars). That meant we counted the bill's limited alternative-tax relief, eventhough that is oddly scheduled to expire after 2004. But in our latest effort weanalyzed the bill's specific effects in each year from 2001 to 2010, taking intoaccount that after 2004, the alternative-tax relief disappears.
Our new 2010 snapshot finds that two-thirds of the ostensibleBush tax cuts for the 27 million taxpayers making between $100,000 and $500,000will be wiped out by the alternative tax. That in turn makes the share ofthe total tax cuts going to the truly rich -- who aren't affected much by thealternative tax -- much larger.