To Cut Taxes, You Need to Do So for People Who Pay Taxes

David R Henderson. Excerpts:

"In a June 7 post, Eugene Steuerle writes:

"That calculation gives a middle-income taxpayer receiving a $100 tax cut the same weight as a high-income taxpayer receiving a $30,000 cut."

Henderson replied "Nothing in the sentence says they get the same benefit. How would they when someone paid $100,000 in taxes and someone else paid $100, all before the tax cut?"

The Tax Policy Center had a post titled, “The 2025 Tax Bill Was Not Targeted Toward Low-Income Families.”

"Of course it wasn’t targeted toward low-income families. How could it be, when most low-income families pay little or no federal income tax and, in some cases, actually get a subsidy from the tax system? If you want to cut taxes substantially, you need to cut them for people who are paying substantial taxes."

"When I rooted around on the Tax Policy Center’s web side, I found a post that carried this:

"Consider a household that earns $20,000 and pays $1 in taxes and another that earns $2 million and pays taxes of $500,000. Suppose that legislation is enacted that provides a $1 tax cut for the low-income household and a $100,000 tax cut for the high-income household. The percentage change in tax liability is 100 percent for the low-income household but only 20 percent for the high-income household. In terms of its effect on current household resources, such a tax cut increases the after-tax income of the poor household by only 0.005 percent while increasing after-tax income of the wealthy household by 5 percent."

"Did you get that? Even if the low-income household’s tax liability were cut by 100%, the tax cut would not be tilted toward the low-income household. Why? Because that household’s after-tax income is hardly affected.

The only good thing about this statement from the Tax Policy Center is that they admit that they don’t judge tax cuts by the percentage by which taxes are cut. They implicitly judge them by whether they substantially increase after-tax income, even for people who pay almost no taxes."