May
01
2001

Spinning the Tax Cut

Press helps out White House by minimizing the richest's gain

Ever since George W. Bush proposed a $1.6 trillion tax cut, his critics have charged that the plan is a giveaway to the wealthy, while the Bush camp has insisted the plan is fair. So far, the media have covered the debate with surprising deference to the administration's spin.

U.S. News & World Report's February 19 cover story on the tax-cut plan featured the usual presidential-honeymoon puffery, marveling at Bush's "derring-do" in facing down critics who "didn't fully appreciate" how deeply he believed in his tax-cutting agenda.

When the piece finally ventured into the tax plan's specifics, it fell straight into the White House PR game. The key aspect of the Bush proposal is that it is focused on federal income and estate taxes--levies paid largely by the rich. It makes no cuts in federal payroll taxes, like those for Social Security and Medicare, which fall most heavily on poor and working-class households. Accordingly, when administration officials defend the plan, they're careful to cite figures showing only its effect on income taxes, ignoring the payroll tax, which is the bigger cost for approximately three-fourths of all households.

U.S. News docilely went along with that deceptive spin. The criticism that the Bush plan gives too much to the rich was countered by U.S. News this way: "Because the wealthy pay the most taxes--the top 20 percent of the country's income earners pay 80 percent of all income taxes--any across-the-board reduction would put the most money in their pockets. But many in lower income brackets would get a higher percentage reduction."

Just like the White House, U.S. News misleadingly focused only on the income tax. When all federal taxes are counted, the wealthiest 1 percent of households, who now provide 20 percent of total federal funds, would get 36 percent of the cuts under the Bush plan (Center on Budget & Policy Priorities, 2/6/01).

And despite the claim that low-income households would get a larger percentage cut, the poorest fifth of households, who have an average income of $8,600, would see their federal tax burden fall the least, by 5.5 percent. Meanwhile, the richest 1 percent--making an average of $915,000--would see their tax burden fall the most, 11.6 percent (Center on Budget & Policy Priorities, 2/6/01; Citizens for Tax Justice, 2/8/01).

U.S. News includes a chart that illustrates the potential impact of the Bush tax plan on households at various income levels. But the magazine's hypothetical families are markedly skewed toward the rich. Only two of the 10 households fall below the median income (a single person and a married couple, both making $25,000 a year). The other eight supposedly representative households are above the median, and six represent the top 20 percent of incomes.

The article asserts that "Americans are divided" about the Bush tax cut, citing a poll that shows 46 percent of Americans favoring "an income-tax cut for all taxpayers" versus 44 percent preferring "targeted tax cuts to help some people pay for specific needs," as some Democrats had proposed. But the piece fails to mention that Bush's plan would not cut taxes for everyone--almost a third of families would see no reduction, with 80 percent of those having at least one worker (Center on Budget & Policy Priorities, 2/7/01).

Ignoring the price tag

A February 5 article in USA Today took the same tack. "With a 10-year price tag of $1.6 trillion, Bush's proposed tax cut offers a break to everyone who pays taxes," reporter Jonathan Weisman wrote. Again, the article missed the crucial fact that payroll taxes are not cut--even though they affect more Americans than the income tax.

Weisman interviewed an "ordinary taxpayer" to show that the Bush plan is not tilted toward the wealthy. But the taxpayer, a retired Army officer earning $76,000 a year along with his wife, actually has an income higher than 80 percent of American households.

Even so, he was skeptical of the Bush plan. "Anybody below $100,000 is going to get screwed," he grumbled. Oddly, the reporter tried to win his source over to the plan by revealing the size of the retiree's expected tax cut, as estimated by Deloitte & Touche: $174 the first year, growing to $871 by 2006 when the plan takes full effect. "That is useful money," the retiree finally admitted.

What such articles fail to point out is that the size of the tax cuts for middle-class households is tiny compared to the enormous cost of the overall Bush plan, most of which comes from cuts for the wealthy. These cuts come with a price tag: Every dollar spent on tax cuts for the rich is one less dollar available for federal programs or paying down debt. Yet in stories like this one, the cost is ignored as reporters focus on the small portion of plan devoted to modest tax cuts for middle-class households.

Citizens for Tax Justice calculated (2/15/01) that the revenue lost from the plan's proposed tax cuts for households in the richest 1 percent alone totals $774 billion over 10 years--more money than the $738 billion it would take to provide prescription drugs to every Medicare recipient, an idea with so much popular support it was favored by both the Gore and Bush campaigns last year.

NBC's David Gregory made the same mistake in a February 5 Nightly News story. Visiting a family in St. Louis, Gregory calculated that their tax bill would fall by $2,100 once the Bush plan was fully phased in, mostly due to Bush's proposed child credit. Based on that, he declared the family to be "big winners under the Bush plan." It's hard to see how: The "big winners" are clearly the wealthiest 1 percent of households, with an average income of more than $1.1 million, who would receive an average cut of more than $54,000. And individuals inheriting money from wealthy relatives would be able to save literally millions of dollars.

Sorting fact from fiction

It shouldn't be hard for journalists to sort out fact from fiction. Figuring out how a tax proposal would affect households at different income levels is a complicated task, but the Treasury Department, the Congressional Joint Tax Committee and Citizens for Tax Justice (CTJ), a liberal Washington think tank, have each developed computer models that can quickly calculate a plan's effects.

Usually, the three models' turn up similar results. But notably, the White House and the Congressional committee, both controlled by proponents of the Bush plan, have refused to crunch the numbers. That leaves CTJ's data, which are widely accepted by tax analysts (New York Times, 3/4/01).

Under pressure from Democrats, the Bush administration did release partial figures, which showed only the plan's effects on income taxes during the early years of the projected cut. Leaving out the estate tax, and the more upwardly skewed income tax cuts that would be phased in later, naturally made the plan seem more egalitarian, so the White House was able to claim that the wealthiest 1 percent of taxpayers would receive "only" 22 percent of the cuts.

The Washington Post (3/3/01) covered the release of this misleading figure by noting credulously that the 22 percent figure was "lower than the estimate of 43 percent cited by Democratic congressional leaders, who have used the statistic to bolster their argument that Bush's tax cut is skewed toward the wealthy." Only further along in the article did the Post reveal that Bush's number did not include the effect of the estate tax cut; even then the piece failed to mention that this difference explained the discrepancy between the two numbers.

As U.S. News noted in its February 19 cover story, "the fate of the [Bush] package may well depend on whether everyday Americans conclude there is enough there to make a real difference in their lives, no matter how much the rich stand to gain." But to make up their minds about the tax cut, everyday Americans need meaningful information about the plan. So far, the media have done little to supply it.