A while ago, I wrote a good summary of my reason why the Bush tax cut was a cut skewed to the rich. Just wanted to restate the core reasoning to keep it fresh on people’s minds. I’ve been hearing a lot lately about the tax cuts being a middle class cut again.

When you look at 2007, you?re only partially right? the people making under $7K do drop to 10%. Everyone also benefits from the savings on the first $7K of their income. If you ignore those people making under $7K (which I suspect make a negligible percentage of our population), here is the final differential from 2000 and 2007 rates:

39.60: 39.60 - 35 = 4.6
36   : 36    - 33 = 3
31   : 31    - 28 = 3
28   : 28    - 25 = 3

So, in 2007 the tax cut gives 11.6% reduction to the top bracket. The 28% bracket (which would have the most to gain from a rate reduction of 3%) saves 10.7%. The other two brackets? under 10%.

The chart says the benefit to the 15% bracket (beyond the shared savings of the creation of the 10% bracket) is an increase of the joint filing limit to 52,500 from 43,850. The other brackets look like they remain static in 2000 dollars (I?m using http://www.bankrate.com/brm/itax/Edit/us_rates/us_rates_personalincome.asp for the 2000 rates? please let me know if those are wrong).

The tax cut is phased in… the longer we let this cut stand, the harder it is to wean us off, especially if we make it to 2007 when the biggest cuts take effect. The Kerry plan of a tax cut aimed at the lower two brackets is probably smarter, since the folks in those brackets are most likely to spend every additional dollar of the tax break, thus boosting the economy immediately.

I also want to point out this previous post where I pointed out The Economist’s unease with the tax cuts Bush has passed:

Mr Bush, for his part, has an election to fight ? and fiscal austerity wins few votes. On the contrary, he will claim that his tax cuts have delivered growth and jobs. They have certainly delivered some of the first, but not much of the second. The economy needs to create more than 140,000 jobs per month just to keep pace with the growth of the labour force. Last month, firms added 112,000 workers to the payrolls; in December, they added just 16,000. This is a poor return on tax cuts that cost the Treasury $195 billion in the 2003 fiscal year. For that money, Mr Bush could have hired 2.5m people to dig holes and another 2.5m to fill them, paying them all America?s average annual wage.

We could’ve just hired 5 million people at the average wage in the U.S. (roughly $32000 or so). Think about that. Heck, we could double the starting salary of the Army, Navy, Air Force, and Marines for that (with lesser impact on our economy, since many serve overseas). Or the teachers.