Bush Tax Cut No Benefit For Most Americans

By James Donahue

By now most wage-earning Americans are discovering to their horror that the big Bush tax cut did not filter down to them. Instead of realizing a break in income tax debt for 2006, we are discovering that the tax we owe has increased.

This writer and his spouse feel fortunate in that we were only hit for an extra $125. An acquaintance, who thought she had more than enough money withdrawn from her weekly salary to cover her tax debt and perhaps deliver a check to cover the surplus, was shocked to learn that she owes another $2,000 in income tax.

We suspect people across the land are silently making this same discovery as they wade through the complexities of calculating their annual income tax returns, or are paying professional people to do it for them.

Yet our legislators approved that much touted tax cut, in spite of warnings by economists and a number of wise newspaper editorial writers that a three trillion dollar federal budget does not warrant a reduction in tax payments at this time.

So if there was a change in the tax laws, what happened? It should not be hard to guess. The tax law was changed, all right, giving more benefits to the wealthy and hitting the moderate wage earner harder than ever before. Those of us on the working front line, sweating on the job for the boss in his ivory tower, are bearing the brunt of the Bush big-business financial rape of the masses.

A New York Times story just one year ago noted that a Congressional study revealed that high income families saw sharp drops in federal tax rates while the tax rates for middle-income earners “edged up.”

The story said an exhaustive analysis of tax records and census data “reinforced the sense that while Mr. Bush’s tax cuts reduced rates for people at every income level, they offered the biggest benefits by far to people at the very top.”

The arithmetic for basic formulating of income tax is relatively simple. People at the poverty level, $7,825 and below, held steady with a tax payment of 10 percent of their income, as did sub-standard wage earners from $31,850 and below, at 15 percent. That covers most retired folks and single mothers struggling to make ends meet by such jobs as working as waitresses at restaurants, store clerks and cleaning motel rooms.

People in the “middle income” bracket, from $31,650 to $77,100, enjoyed a reduction in tax from 28 percent to 25 percent. The scale of tax reductions drops more dramatically as annual incomes rise.

So if there was no flat raise in taxes for anybody, and even the low income earners remained at 15 percent, why are we getting hit with bigger tax bills this year you might wonder?

Written into every tax law is a complex formula for calculating not only the taxable income generated throughout a year, but also a variety of tax deductions, thus helping us escape the clutches of full payments to the tax man. Most of us pay our professional tax providers well to get the training needed each year to understand the changes in the tax code and use this knowledge to help us do this.

Thus while a new bill may give the appearance of a tax reduction, it also can have hidden alterations written into it that take away many of those tax loopholes, once available to even the poorest of wage earners, and give them only to the rich.

Thus the law might say a man earning a salary of $500,000 a year might be taxed up to 35 percent of his money, after he utilizes all of the loopholes and tax deductions awarded him by the law, he ends up escaping any tax payment whatsoever.

Those of us at the lower end of the spectrum, in the meantime, are forced to pay the difference.

After all, the Bush Big Business machine has to get all those trillions of dollars to stuff in their pockets from somewhere.