President Bush yesterday parried accusations that his tax cut proposal is unfairly tilted toward the wealthy as Democrats and some moderate Republicans voiced opposition.
The president traveled to a company in Alexandria that manufactures flags for the presidential limousine, where he argued that his $670 billion tax cut plan would provide substantial benefits for small businesses and moderate-income families. Bush, in his remarks, referred to several middle-income families who he said would pay sharply less in income taxes.
"You hear a lot of talk in Washington, of course, that this benefits so-and-so or this benefits this, the kind of the class warfare of politics," he said. "Let me just give you the facts that, under this plan, a family of four with an income of $40,000 will receive a 96 percent reduction in federal income taxes."
Yesterday's remarks plunged Bush into a growing argument about who benefits from the tax-cut proposal he introduced this week. Administration officials have been rebutting what they call "class warfare" accusations even before they released Bush's plan, although they acknowledged that the wealthiest Americans would receive the highest boost to their incomes from Bush's plan in both dollar and percentage terms.
A calculation of the effect of Bush's proposal done by the Brookings Institution and the Urban Institute found that the top 1 percent of Americans, those with incomes of $374,000 or more, would get 28.3 percent of Bush's tax cut, an average benefit of $24,428, or a 3.5 percent increase in income. The 20 percent of Americans in the middle, those earning $29,000 to $46,000, would get 6.1 percent of the benefit of Bush's plan, an average benefit of $265 or an increase in income of 0.9 percent.
A calculation done by the liberal group Citizens for Tax Justice produced similar results, finding that the top 10 percent of earners, those above $104,000 in income, would get an average tax cut of $5,578, or 60 percent of the total benefit, while the bottom 60 percent, those earning less than $46,000, would receive an average cut of $131, or 8.5 percent of the total benefit.
The Bush Treasury Department, using a broader definition of income, found similar results. It calculated that those earning more than $100,000 would get 66 percent of the benefit of the Bush tax cut, while those earning $50,000 or less would get 10.5 percent.
A senior Treasury Department official interviewed yesterday said it is true that wealthier Americans get a larger percentage increase in their after-tax incomes than those at the lower end of the scale. But he said they get a smaller percentage decrease in their taxes. As a result, Treasury figures show, the share of the tax burden borne by those earning more than $100,000 would rise from 72.4 percent to 73.3 percent.
In a sign of concern about the benefits for the wealthy in Bush's plan, Sen. Lincoln D. Chafee (R.I.), a Republican moderate, yesterday introduced legislation with Sen. Dianne Feinstein (D-Calif.) to prevent the top tax rate from being reduced. Chafee said "there could be problems" for Bush's proposal because he was "hearing mumblings" from other senators.
Feinstein, echoing other Democrats, said Bush's plan "is skewed to the wealthiest 1 percent of Americans." On Wednesday, Senate Minority Leader Thomas A. Daschle (S.D.) called it "obscene."
Like Bush, White House press secretary Ari Fleischer said the Democrats were engaging in "class warfare" in criticizing the plan. "It's class warfare to say that there are wrong people in America and these wrong people are not deserving of tax relief."
The president, in his remarks today, said that "all people who pay taxes should get tax relief."
Under Bush's proposal, about 39 million of the 134 million who file tax returns would not receive any benefit. Those tend to be low-income workers who pay payroll taxes but do not earn enough to pay federal income taxes. Still, Bush's plan would bring substantial gains for a slice of Americans who would benefit from an increased child tax credit and revised treatment of married couples.
In his remarks, Bush emphasized the middle-income family of four, making $40,000, whose taxes would decline from $1,178 to $45. "Now that may not mean a lot of money to some of the big shots," he said. "It means a lot of money for the family of four making $40,000."
Bush also highlighted the part of his proposal, costing $16 billion over 10 years, that would allow small businesses to raise the amount of equipment purchases they can write off to $75,000 from $25,000. In Bush's remarks to a small crowd of area residents and politicians, at the National Capital Flag Co. in Alexandria, he said the facility off Duke Street, which has about 30 employees, would be able to buy two new machines with the savings.
His audience was generally impressed. "He seems like he's really sincere about trying to help working families and companies like ours that can use these kind of benefits," said Wayne Page, who has worked at the flag company for 13 years and is now a manager.
But one participant, Don Lucas, a 74-year-old retired accountant, told the president that while he approved of his overall plan he thought the dividend tax cut was unfair. "It's a good idea, but I've got to be honest with you, I don't think it's fair," Lucas said, adding: "I think corporations should pay taxes on their profits and I should pay taxes on the dividends that come to me as income."
"That's the debate," Bush replied.