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March 11, 2003

Why Right Hates Tax Cuts for Middle Class

Read this Wall Street Journal oped opposing tax cuts.

A WSJ article AGAINST tax cuts? How can that be?

Well, they are complaining only about provisions that would increase tax credits for children or widen the 10% tax credit or otherwise help the non-wealthy.

And why are tax cuts for the non-wealthy so evil?

The marriage penalty relief and child credit would drop three million people from the income tax rolls. This is bad public policy because it increases the number of voters who think that general government (ex-Social Security and Medicare) is a free good, and who do not care how big the government is or how high the income tax rates are.
Quoting myself again, but I noted this conservative obsession against tax cuts for middle income folks back in 2001 here.

Although the WSJ does point out that for "supply side" believers that marginal tax rates matter (and I actually believe that overall), the child tax credits have a "phase-out" period that upper-middle income families will feel as a hike in their marginal tax rate.

In practice, such upper-middle class taxpayers will actually have a LARGER marginal tax rate after Bush's tax cuts than before. Which is reasonable to think about, except the far bigger problem is that the working poor face astronomical marginal tax rates and marriage penalties due to the phase-out of the Earned Income Tax Credit. The bizarreness of this problem is hard to explain, so I will leave it to Max Sawicky here and his solution here.

Posted by Nathan at March 11, 2003 08:40 AM

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