Public Nuisance

Random commentary and senseless acts of blogging.

The first Republican president once said, "While the people retain their virtue and their vigilance, no administration by any extreme of wickedness or folly can seriously injure the government in the short space of four years." If Mr. Lincoln could see what's happened in these last three-and-a-half years, he might hedge a little on that statement.
-Ronald Reagan

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Tuesday, May 06, 2003
 
Spot the Lie

Hesiod invites readers to refute this claim:

"We need aggressive action out of the United States Congress now," Bush said. The president said that under his plan a family of four making $40,000 a year would see their federal taxes reduced from $1,178 to $45 a year. As he did Monday, Bush urged supporters to call members of Congress and urge action on tax cuts.
This seems to be based on this White House line:

A married couple with two children and income of $40,000 will see their taxes reduced by $1,133 (from $1,178 to $45) in 2003, a decline of 96 percent.

The White House refers to 'taxes', CNN to 'federal taxes'. As seems to be often the case, the media has reworded the GOP spin point but carefully not improved the accuracy.

In fact, this refers only to federal income taxes. Income taxes are not, however, a major portion of the tax burden borne by most working families. The main tax they pay is the FICA or Social Security tax. This is the most regressive part of the tax system because it is assessed only on the first $84,900 of earned income, meaning that a janitor working for minimum wage pays substantially more as a percentage of income than an executive making over $1,000,000. Not surprisingly, it is one tax that George Bush has never proposed to cut by a single penny.

Along with the FICA, there is also the Medicare tax, 1.45% without an upper limit. The combined cost of these two taxes to a family with an income of $40,000 is $3,060. So, making the generous assumption that the numbers are otherwise accurate, the said family's federal taxes are reduced from $4238 to $3105, a cut of 26.7% rather than the 96% promised by the White House.

But the employee's FICA contribution is matched by the employer. Although the direct cost of this is borne by the employer, it is in effect an added cost of the employee's services which the employer is willing to assume. This means that it is ultimately borne primarily by the employee, who would otherwise be likely to receive those costs directly. Using that calculation, the payroll tax on a $40,000 income is $6120, making a total federal tax of $7298 which goes down to $6165, a tax cut of 15.6%.

This doesn't take into account the family's state and local taxes, or the very real possibility that the family has other deductions - for instance, if this familiy does manage a mortgage, admittedly a strain for a two child family at that income, they probably are already paying next to 0 in federal in income taxes, and would receive no benefit from the Bush plan.






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