19 Explain why tax cuts in a progressive income tax system are consistently criticised for favouring the

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19 Explain why tax cuts in a progressive income tax system are consistently criticised for favouring the wealthy.

A shrinking number of Americans are bearing an even bigger share of the nation’s income tax burden. In 2005, the bottom 40 per cent of Americans by income had, in the aggregate, an effective tax rate that’s negative: Their households received more money through the income tax system, largely from the earned income tax credit, than they paid. The top 50% of taxpayers pay 97% of total income tax and the top 10% of taxpayers pay 70%. The top 1% paid almost 40% of all income tax, a proportion that has jumped dramatically since 1986.
Given the US tax system, any tax cut must benefit the rich, but in terms of the change in effective tax rates: the bottom 50%
got a much bigger tax cut under the Bush tax cut than the top 1%. Did the dollar value of Bush’s tax cuts go mostly to the wealthy? Absolutely.

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Economics

ISBN: 9781118150122

10th European Edition

Authors: Michael Parkin, Dr Melanie Powell, Prof Kent Matthews

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