The Corner

Politics & Policy

Tilting at Windmills

Yesterday I wrote that Republicans have a reasonable argument to make that their tax cut does not tilt in favor of the rich, but that it’s going too far to say that it tilts toward the middle class. Veronique de Rugy and Chris Edwards both take issue with my post. (Edwards thinks my post was directed at the two of them; I didn’t actually have them specifically in mind, but probably had some of their writings in the back of my head.)

They’re quite right that I used the wrong chart. This is actually two mistakes in one, since I wrote up a correction last night and then somehow failed to hit “publish” (I just did it). But using the right chart doesn’t make a material difference. Under a broad definition of the middle class (households with an income between $20,000 and $200,000), its share of the federal tax burden falls from 50.1 to 49.7 percent. Under a narrow definition (households making between $40,000 and $75,000), its share falls from 10.2 to 10 percent. This does not seem like a tilt toward the middle class worth writing about.

We do, however, have a real difference. Both de Rugy and Edwards suggest that it’s wrong to include payroll taxes as part of the taxes people pay because the bill is concerned with income taxes, not payroll taxes. It’s by excluding payroll taxes that they conclude there’s a significant tilt toward the middle class. I think this is a weird way of looking at the effect of the bill on tax burdens.

First of all, the bill actually does include a provision that is intended to offset payroll-tax liabilities. Second, the Senate considered, and rejected, an attempt to have the bill offset more payroll-tax liabilities. Third, doing tax-policy analysis this way would generate odd results.

So, for example, consider a bill that does nothing but eliminate the estate tax. Everybody understands that the direct benefits of this bill would accrue to inheritors of large estates. Everybody understands that repeal of the estate tax would cause the middle class to pay a slightly larger share of the tax burden. Using the de Rugy/Edwards methodology–as Edwards uses it in this post–we would have to deny this obvious truth. We’d have to say, No, no, you can’t look at the total federal tax burden, because the bill concerns only the estate tax. And it repeals the estate tax equally for everyone. It’s an across-the-board tax cut!

I’d be for repealing the estate tax, but I wouldn’t jump through hoops to pretend that the distributional consequences are other than what they are. Republicans chose to cut taxes in a way that leaves the distribution of the total federal tax burden between middle-income and high-income households largely unchanged. It’s a defensible choice. It’s also the best way to describe what they did.

Ramesh Ponnuru — Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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