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Bush Misleads the Average Joe on Tax Cuts

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Isaac Shapiro is a senior fellow at the Center on Budget and Policy Priorities.

In President Bush’s recent speeches about the tax cuts in his “economic growth” package, he has emphasized an eye-catching point when talking about its benefits. “Under this plan,” he has said, “92 million Americans receive an average tax cut of $1,083. That’s fair.”

He has also asserted that “we estimate that 23 million small-business owners across America will receive an average income tax rate cut of $2,042. That matters.”

These points, which have been echoed repeatedly by other administration figures, convey the impression that the proposals are balanced and of benefit to the little guy, or at least the little-business owner. That’s flat-out misleading.

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Most taxpayers and small-business owners would receive far less than this average amount because, in generating its figures, the administration has averaged the massive tax cuts that those at the top would receive with the far more modest tax cuts that those in the middle of the income spectrum would get. To illustrate how this deceptive use of averages works: If 10 people were in a room, nine of whom have low- and middle-incomes but one of whom is Bill Gates, on average all of these people are very rich.

An analysis of Bush’s tax-cut plan by the Urban Institute-Brookings Institution Tax Policy Center shows that the average cut for filers in the middle fifth of the population -- folks right in the middle of the income spectrum -- would be $256, a quarter of the $1,083 figure the administration cites for the average taxpayer.

Overall, 80% of filers would get less than $1,083. The top 1% of tax filers would receive an average tax cut of $24,100 in 2003, and those with incomes of more than $1 million would get tax cuts averaging a whopping $90,200. Like those 10 people in the room, it is the huge tax cuts that the wealthier groups receive that drive up the overall average.

Similarly, nearly 80% of filers with small-business income -- or nearly four of every five -- would receive less than the $2,042 average the administration is touting. The majority of all small-business owners would get less than $500.

When confronted at a recent congressional hearing with some other average numbers related to the budget, Office of Management and Budget Director Mitchell Daniels conceded the budget numbers in question were averages and that “averages can be misleading.”

Yet the administration persists in pushing its tax-cut numbers, ignoring their obvious problems and evidently calculating that repetition and the public’s desire to trust in the president’s veracity will win the day on support for the package.

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