Editorial
Stripped bare, the tax bill still favors the rich

Don't kid yourself. When you strip away all the rhetoric and confusing numbers, the real impact of the tax bill just passed by Congress becomes starkly clear.

The bill tilts toward the rich, and it will ensure that the gap between rich and poor will continue to grow.

What this means, in crude terms, is that Congress has effectively committed a substantial portion of the nation's treasure to the cause of greater income inequality. That is money that cannot now go toward reducing the debt, supporting the military, providing stability for Social Security or improving the welfare and health of the nation's needy.

Yes, several years of surpluses suggest it was time for tax reduction. And yes, the tax bill is not the only business Congress has in mind; it is spending money on debt reduction, social welfare, the military and the rest.

But by focusing first on tax relief, Congress has committed resources where they are needed least.

The strongest evidence of the uneven tilt of this tax bill comes out of a new study by the Congressional Budget Office. According to The Washington Post, this study — unlike many previous studies — took a more sophisticated look at income data.

For the wealthy, it merged in capital gains that tend to be left out of Census income.

For the poor, it included non-monetary benefits that have an income impact, such as food stamps. Here's what it found:

Adjusted for inflation, the average after-tax income of households in the top 1 percent was $414,000 higher in 1997 than in 1979.

For the middle fifth of families, the increase was $3,400, while for the bottom fifth the average actually fell $100.

The rich got richer, the middle is struggling along in place and the poor got poorer.

Supporters of the tax bill point out that the share of the total tax burden carried by the wealthy has gone up. That's true, but their share of the nation's overall household income is up even more.

And while tax rates have gone down for all income groups, the percentage reduction has been greatest for the most wealthy. In other words, they are paying a smaller share of substantially higher incomes.

Because of income mobility, it is likely that some of those households that were at the bottom in 1979 are now in the middle or upper classes. So it is not necessarily the same rich getting richer or the same poor getting poorer.

But it is a fact that income distribution patterns remain unequal in this country. This tax bill will only make the situation worse.