Revised September 24, 2004

by Robert Greenstein

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The “middle-class” tax-cut legislation that the House and Senate approved last night reflects an exercise in cynicism unusual even for Washington, D.C.  Its “middle-class” label cloaks several significant deficiencies.  For example, the legislation benefits high-income households considerably more than the middle class, and even though the bill emerged out of dormant legislation designed to help low-income working families, the revised legislation treats these families unfavorably.

Another Deficit-Financed Tax Cut

The legislation increases the deficit significantly, despite the availability of a way to pay for it.  It also busts the widely-trumpeted $350 billion limit on last year’s tax-cut legislation, and does so by violating standard Congressional procedures and thereby denying senators an opportunity to consider alternatives under which the costs of those tax cuts would be paid for.

 Middle-Class Families Aren’t the Main Beneficiaries and Could End Up Net Losers

The legislation is not the middle-class package it is portrayed as being.  Indeed, when it is paid for — as it eventually will have to be, given the large, persistent deficits we face — middle-class households are likely to lose more from the steps taken to pay for the tax cuts than they will gain from the tax cuts themselves.

Rejecting Proposals to Help Low-Income Working Families

 In several respects, the bill treats low-income working families less favorably than those who are better off.  It provides “marriage penalty” relief for all households except those with low incomes.  It doesn’t address the ongoing erosion of the Child Tax Credit for the working poor, which has made full-time minimum-wage workers ineligible for the credit.  Finally, the Congressional conference committee that crafted the legislation rejected an attempt to fix this erosion of the child credit in part on the grounds of error rates in the Earned Income Tax Credit, but then rejected the Administration’s own proposal for simplifying the EITC and reducing errors in it.

 In short, both the legislation and the process used to develop it — and to deny the Senate a vote on proposals to offset its cost — represent the latest step in the continuing slide toward fiscal irresponsibility, the thwarting of normal democratic processes, and favoritism toward the comfortable and well-off accompanied by neglect of working-poor families who need help the most.