Wednesday February 28 1:27 PM ET Bush Team Disputes Charge Tax Cut Favors Rich
By Randall Mikkelsen
WASHINGTON (Reuters) - On the day President George W. Bush (news - web sites) presented his $1.6 trillion tax cut proposal to Congress, his economic team on Wednesday aggressively defended the plan against charges it targets benefits to the rich.
Treasury Secretary Paul O'Neill called the charges ''nonsense'' aimed at making a populist point and said the share of all taxes that are paid by the wealthy would rise under Bush's 10-year tax cut plan.
But in an often-contentious news briefing on Bush's budget proposal for fiscal 2002, which the president formally released on Wednesday, O'Neill declined to say how the cut would be distributed in dollar terms.
``It's a nonsense set of statistics,'' O'Neill said, referring to estimates by the Citizens for Tax Justice advocacy group which contend the Bush plan is skewed to the rich and which have been adopted by Democrats opposed to the plan.
The across-the-board cut in tax rates, the largest component of Bush's tax cut, would give the largest percentage reductions to low and moderate income taxpayers, Bush officials said. Bush also proposed doubling the per-child tax credit, eliminating estate taxes and reducing the disparate tax treatment of two-income married couples.
The Citizens for Tax Justice, which favors progressive tax policies placing greater burdens on the wealthy, estimated Tuesday that the wealthiest one percent of Americans would receive some 45 percent of the combined benefits of Bush's proposed tax cuts, in dollar terms.
The average income tax cut for the top one percent of taxpayers, those earning $373,000 or more, would be $28,688, the group projected, and the average total tax cut would be $54,480. This compares with a total tax cut of $47 for the lowest 20 percent, those earning less than $15,000.
PLAYING GAMES WITH NUMBERS?
``They're playing games with the numbers,'' O'Neill said.
Asked for Bush administration estimates of the distribution, he said, ``It doesn't seem to me legitimate to even try to respond to a question that is based in a fiction of combining, not just income taxes, but payroll taxes and cobbling up a bunch of other pieces of stuff to make a populous point that has no basis in fact.''
``The fact is, what the president has proposed for tax changes moves the incidence of taxes proportionately to the higher-income group, not the lower-income,'' he said.
Bush projected during his campaign the income tax cut would eliminate federal income taxes for 6 million low-income families and cut marginal tax rates for millions of others.
Democrats opposed to the tax cut say it favors the wealthy and threatens to throw the budget back into deficit if the economy sours unexpectedly.
White House Budget Director Mitch Daniels said there was ''vastly more than enough room'' in the long-term budget for Bush's tax plan, and that a $1 trillion reserve fund proposed by Bush would guard against ``vagaries'' of the future.
O'Neill said it would cost about $20 billion to $30 billion extra to make the tax cut retroactive to January 1, 2001, which Bush has urged but did not formally propose in his budget.
Accelerated Phase-In
It would cost additional money to accelerate the phase-in of the rate reductions, another change the White House is considering, he said.
O'Neill said some acceleration would be possible without impinging on other budget commitments for next year. He added that the phase-in dates may need to be adjusted to stay within the overall $1.6 trillion, suggesting later reductions could be stretched out.
However, he said, ``There's been no indication in all the meetings that I've attended with the president on this subject that he is prepared to give an inch on the principles that are embedded in this tax reform program.''
The budget puts an additional $417 billion price tag on the tax cut, in terms of how much interest the government will have to pay if it cuts taxes instead of repays outstanding debt.
O'Neill discounted the significance of the figure, saying it was included in line with established budgeting principles that do not account for economic benefits of the cut, and cited estimates that the benefits would outstrip the interest cost.
Democratic Claims
Daniels also dismissed as ``preposterous'' Democratic claims that Bush would weaken the Social Security system.
Bush has proposed using $2 trillion of the $2.6 trillion in anticipated Social Security system surpluses to pay down government debt, leaving $600 billion that Daniels said could be used to fund Bush's proposed private investment accounts for workers.
Democrats have said such accounts would drain money from the system that would be used for benefits.
In addition, Daniels sought to downplay any focus on budget cuts recommended by Bush, saying there were few cuts and vowing to wean reporters from a ``strange fixation'' on them.