HAVE THE 2001 AND 2003 TAX CUTS MADE THE TAX CODE MORE PROGRESSIVE?With debate beginning on the Senate budget resolution, congressional supporters of the 2001 and 2003 tax cuts have begun recycling old arguments for extending all of these tax cuts. Among these is the claim that the tax cuts have made the tax code more progressive.
The reality is that the tax cuts have made the tax code more regressive. A progressive tax code is one that makes the distribution of after-tax income more equal than the distribution of pre-tax income, and one tax code is “more progressive” than another if it has a larger effect in reducing income inequality. So, in order for the 2001 and 2003 tax cuts to have made the tax code more progressive, after-tax incomes would have to be less unequal today than if the tax cuts had not occurred. In fact, however, the reverse is true: the tax cuts made the distribution of after-tax income more unequal.
When fully in effect, the 2001 and 2003 tax cuts will increase the incomes of high-income households by a much larger percentage than the incomes of low- or middle-income households, according to estimates by the nonpartisan Urban-Brookings Tax Policy Center. As Figure 1 shows, the tax cuts will increase the after-tax incomes of households with annual incomes above $1 million by an average of 7.5 percent, compared to a 2.3 percent increase for households in the middle of the income spectrum and a 0.5 percent increase for the lowest-income 20 percent of households. This means that high-income households will hold a larger share of the nation’s after-tax income as a result of the tax cuts.
Claims That the Tax Cuts Were Progressive Rely on a Flawed MeasureSupporters of the tax cuts generally do not attempt to refute these facts. Instead, they frequently point to CBO data showing that high-income households paid a larger percentage of federal taxes in 2004 (after the tax cuts) than in 2000 (before the tax cuts). They claim that this shows that the tax cuts made the tax system more progressive, and they imply that it means that high-income households received disproportionately small tax cuts, or even that these households are paying more in taxes now than in earlier years. Such claims and inferences are incorrect.
The same CBO data cited by tax-cut supporters also show that high-income households are paying considerably less of their income in taxes now than before the tax cuts. In 2000, households in the top 1 percent of the income scale paid an average of 24.2 percent of their income in federal individual income taxes. By 2004 (the latest year for which data are available), that figure had fallen to 19.6 percent, the lowest level since 1986. That decline works out to a reduction in these households’ tax burden of about $58,000 per household (in 2004 terms).
http://www.cbpp.org/3-19-07tax.htm To make a long story short, the rich have gotten richer and the poor have gotten poorer. So much for that trickle down thing. A half truth is being employed here to distort the facts. A higher percentage of the national tax revenue comes from the wealthiest 10% for 2 reasons: They ended up with all the money and the rest of us are bankrupt thanks to Junior's assault on the middle class.