A Phony Argument on Income Taxes ; an Assertion by Bush's Budget Director Obscures Issues Arising from the Concentration of Income and Wealth at the Top

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President Bush caused a stir in liberal circles when, earlier this month, he admitted that income inequality in the United States has been rising for 25 years - a trend starting before his White House years.So what will he do about it?According to Robert Greenstein, director of the Center on Budget and Policy Priorities, a nonpartisan Washington think tank, Mr. Bush will act by decisively widening the "yawning gap" between rich and poor. The president's budget for fiscal 2008 "puts extremely large tax cuts for the most affluent Americans ahead of the needs of low- and middle-income families as well as future generations," Mr. Greenstein says.People with incomes of more than $1 million would get tax cuts averaging $162,000 a year (in 2012 dollars) in perpetuity. The top 1 percent of households will receive more than $1 trillion in tax benefits over the next decade, if the Bush tax cuts are made permanent.Asked about this charge on PBS's "The NewsHour With Jim Lehrer" last week, Budget Director Rob Portman said that the tax burden borne by the top 10 percent of taxpayers has paradoxically risen from about 64 percent to 66 percent as a result of the tax cuts passed by a Republican Congress.Apparently, a staffer at the Office of Management and Budget indicated Mr. Portman was referring to a Treasury study projecting the share of individual federal income tax revenues paid by the richest 10 percent in 2005 to be 65.8 percent, compared with 63.6 percent without the Bush tax breaks. Their share of gross income was calculated at 42.1 percent.It is true that the well-to-do pay a big chunk of the individual income tax burden and that the federal income tax is progressive - the rich pay more of their income in taxes because they can afford it more easily than the middle class can. The poor pay scant income taxes.But the fact that the share paid by the rich is rising "is a bad thing, not a good thing," says Robert McIntyre, director of Citizens for Tax Justice, a liberal Washington think tank.That's because it reflects the increasing share of total income flowing to the prosperous, and not that they are being harder hit proportionately by taxes. In other words, if you have more of the money, you pay more of the taxes. To take the argument to an extreme, if one person got all the income, he or she would pay all the income taxes, too.So in Mr. McIntyre's view, Portman's argument is phony, a statistical trick to obscure issues arising from the concentration of income and wealth at the top. …