A Project of The Annenberg Public Policy Center

Clinton vs. Bush: Middle Income Taxes


Q: Do middle-income persons pay lower federal income taxes under Bush than they did under Bill Clinton?

A: Yes, middle-income taxpayers pay less, but not nearly as much less as claimed in a widely circulated chain e-mail. Moreover, both Barack Obama and Hillary Clinton propose additional middle-income cuts, contrary to what the message insinuates.

FULL QUESTION

I received this forwarded email from my sister… She constantly distributes this sort of stuff. I don’t want to cause family dissention, however, if I could at least enlighten her, I would feel better. It is my duty to find out if this is true or not first and I thought you would be the best source.

Subject: FWD: Taxes

 

How about this information? Most voters are completely ignorant of  the pertinent facts that should be considered when one enters the voting booth.

[EET ] After watching a focus group of democrats that watched the democratic
debate the other day in Vegas, I literally wanted to puke. For the most part, all of them bashed Bush over and over again on how he is out for his millionaire friends and the big oil companies and he has totally forgotten or disregarded the little guy. So being an ex-IRS employee, I decided to look back on the tax tables to see if there is any truth to what they said and the media keeps stating as fact, "Bush is only out for the rich in this country.

Based on using the actual tax tables (see link below), here are some examples on what the taxes were/are on various amounts of income for both singles and married couples. so let’s see if the Bush tax cuts only helped the rich.

http://www.taxfoundation.org/publications/show/151.html

Taxes under Clinton 1999              Taxes under Bush 2008
Single making 30K – tax $8,400        Single making 30K – tax $4,500
Single making 50K – tax $14,000      Single making 50K – tax $12,500
Single making 75K – tax $23,250      Single making 75K – tax $18,750
Married making 60K – tax $16,800   Married making 60K- tax $9,000
Married making 75K – tax $21,000   Married making 75K – tax $18,750
Married making 125K – tax $38,750 Married making 125K – tax $31,250

If you want to know just how effective the mainstream media is, it is amazing how many people that fall into the categories above think Bush is screwing them and Bill Clinton was the greatest President ever. If any democrat is elected, ALL of them say they will repeal the Bush tax cuts and a good portion of the people that fall into the categories above can’t wait for it to happen. This is like the movie the Sting with Paul Newman, you scam somebody out of some money and they don’t even know what happened. Now this is effective (maybe not honest) marketing or maybe a better word is brain washing. [/EET]

 

FULL ANSWER

The first thing to note is that every number in that e-mail is wrong. They grossly overstate the Bush tax cuts at all levels.

The Tax Foundation, the very group this spurious e-mail cites, says the message is wrong. The link provided in the e-mail leads to a message saying: "Note: If you clicked on this link in response to an e-mail comparing income taxes under Presidents Clinton and Bush, please see this page." And that link in turn leads to an article by senior economist Gerald Prante and staff writer Alicia Hansen of the Tax Foundation. They call the e-mail "incorrect" and add that it "contains some mathematical errors," which is putting it mildly.

The Tax Foundation is an anti-tax, pro-business group and about the last place we would expect to defend the tax policies of the Clinton administration. Prante and Hansen state, quite correctly, that "federal income taxes have indeed fallen under George Bush for groups at all points on the income spectrum." No tax expert we know of disputes that. Nevertheless, to its credit, the Tax Foundation demolishes this particular comparison.

The "mathematical errors" in the e-mail actually are huge, resulting in very large  overstatements of the amounts by which persons in various low- and middle-income categories benefited from the tax cuts. For example, the e-mail claims a tax cut for a single person making $30,000 a year that is nearly 10 times larger than the actual cut as calculated by Tax Foundation experts.

Here’s a table we created, comparing the cuts claimed in the e-mail with the cuts calculated by the Tax Foundation.

 

 Cut Claimed by E-mailActual cut per Tax FoundationE-mail over-
statement
Single making 30K$3,900.00$401.25$3,498.75
Single making 50K$1,500.00$656.25$843.75
Single making 75K$4,500.00$1,406.25$3,903.75
Married making 60K$7,800.00$1,072.50$6,727.00
Married making 75K $2,250.00 $1,664.00 $586.00
Married making 125K $7,500.00 $3,964.00 $3,536.00

 

Actual results would vary from one individual or couple to another, depending on circumstances. The Tax Foundation’s Prante and Hansen say their calculations assume each taxpayer took only the standard deductions and had no children. They also ignored the effects of the Alternative Minimum Tax, which might have further reduced the benefit of the Bush tax cuts for some at the upper end of the scale.

The anonymous author of the e-mail made several fundamental errors, according to the Tax Foundation’s experts. One error was to apply the top statutory rates for 1999 and 2008 to ALL income, even though much income would be taxed at lower rates in the lower tax brackets. The author also failed to account for any tax deductions or exemptions. A less obvious mistake was failing to realize that even under the 1999 law, tax brackets would have been adjusted for inflation every year. To get a valid apples-to-apples comparison, the Tax Foundation compared taxes due under the Bush cuts with what would have been owed under the 1999 law with brackets adjusted for inflation as scheduled.

Distorting the Big Picture
 

Not only does this seemingly authoritative e-mail message get all the details wrong, it also falsifies the bigger picture. It says, "If any democrat is elected, ALL of them say they will repeal the Bush tax cuts." It goes on to say that people in the income categories specified are about to experience a "scam" and suggests they have been subjected to "brain washing."

Actually, neither Barack Obama nor Hillary Clinton has said they favor the repeal of all the Bush tax cuts. They’ve only proposed repealing them for high-income taxpayers. In fact, both are promising additional tax cuts for most or all of the persons who fall into the groups itemized in the e-mail.

Obama promises a $500 tax cut for the large majority, according to his Web site:

Obama Web site: Obama will restore fairness to the tax code and provide 150 million workers the tax relief they need. Obama will create a new "Making Work Pay" tax credit of up to $500 per person, or $1,000 per working family. The "Making Work Pay" tax credit will completely eliminate income taxes for 10 million Americans.

And Clinton says she’ll "let the Bush income tax cuts expire for those making more than $250,000," while further lowering taxes for "middle income" families:

Clinton Web site: Hillary will extend middle class tax relief, the child tax credit and marriage penalty relief, and reform the AMT to ensure people don’t face stealth tax increases.

We can’t say whether either of the leading Democrats actually would deliver on these promises. We haven’t forgotten Bill Clinton’s undelivered promise of a "middle-class tax cut" from his first run for the White House. In a 1991 speech at Georgetown University in Washington he said: "I will offer middle-income tax cuts. … The average working family’s tax bill will go down about 10 percent, a savings of about $300 a year." He included the idea in his early advertising, too, but then ditched it after sewing up the Democratic nomination. He eventually pushed through a large tax increase, though it fell almost exclusively on the top 1 percent or 2 percent of incomes.

Nevertheless, whether one believes Obama or Hillary Clinton or not, both are promising just the opposite of what this factually challenged mass e-mail states.

– Brooks Jackson

Sources

Gerald Prante and Alicia Hansen, "Comparing Income Taxes under Bill Clinton and George Bush" Tax Foundation 19 Feb 2008.

"The 1992 Campaign: On the Trail; Clinton Disavows Idea of Middle-Class Tax Cut," New York Times 19 June 1992.

Michael Kelly, "CLINTON’S ECONOMIC PLAN: The Campaign; Gambling That a Tax-Cut Promise Was Not Taken Seriously," New York Times 18 Feb 1993.

Hillary for President. "Shared Prosperity for American Families." 14 Feb. 2008.

Hillary for President. "Hillary Clinton’s Economic Blueprint for the 21st Century: Rebuilding the Road to the Middle Class." 27 Oct. 2007.