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Dean Wrong on Bush Tax Cut

He falsely claimed most middle-class people got no cut

December 4, 2003

Modified: December 5, 2003

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Summary

 

Howard Dean got his facts wrong on two counts Sept. 4 during the Democratic candidates’ debate in New Mexico when he said most middle-class people never got a tax cut from George Bush, and when he implied that the average cut was only $100. In fact, huge majorities of Americans are seeing taxes reduced, and by a lot more than $100.

Analysis

 

Dean's miscue came as he called for repeal of President Bush's tax cuts:

Here's what we're going to do. We are going to repeal the Bush tax cuts.
You can't pay for health insurance if you have those tax cuts, including
the tax cuts for middle-class people. Most middle-class people never got
a tax cut from George Bush, and I'm sure they'd rather have health
insurance for everybody than the $100 they got from George Bush's tax
cut.

Actually, according to a nonpartisan analysis by the Urban-Brookings Tax Policy Center, nearly 75% of all families are getting a tax cut this year from the two tax bills signed into law by President Bush in 2001 and 2002. The amounts vary widely, but the average is $1,217 – a dozen times more than Dean suggested.

 Even families making only $20,000 to $30,000 a year are getting an average cut this year of $638. And 98.4% of that group -- "middle-class" by almost anybody's standards -- are getting some tax reduction, exactly contrary to what Dean said. And the amount of money is significant -- it increases their after-tax income an average of 2.7 percent above what it would have been before the Bush tax cuts.

And for those farther up in the middle-class hierarchy -- making $75,000 to $100,000 a year -- the Bush tax cuts are worth an average of $2,543 this year -- 25 times more than the $100 figure Dean suggested. More than 20 million American families earn $75,000 a year or more, and will be getting tax cuts in the thousands of dollars this year, not the the hundreds.


Generally, the only ones who get NO cut are those making less than $10,000 a year -- and few would think of them as middle-class. They’re the ones who earn too little to pay federal income tax in the first place, mostly singles and elderly retirees. Only 7 percent of them get a tax cut.

Sources

Table 5.17 "Combined Effect of EGTRRA and Conference Agreement on the Jobs and Growth Tax Relief Reconciliation Act of 2003: Distribution of Income Tax Change by AGI Class, 2003" Tax Policy Center (Washington DC) 23 May 2003.

Notes: The analysis was prepared as the second Bush tax cut had taken final form in Congress and was nearing passage. The table shows the combined effect of  “EGTRAA” -- which was the first Bush tax cut passed in 2001 and officially the Economic Growth and Tax Relief Reconciliation Act of 2001, and the “Conference Agreement,” the House-Senate compromised that later passed and was signed into law by the President. The tables show the effects on “tax units” (families and singles living independently) at various levels of “AGI,” which refers to "Adjusted Gross Income" as reported by tax filers to the Internal Revenue Service.