The "Average" Kitchen Table

President Bush's State of the Union address last night was possibly one of his best. He even seemed to express genuine concern for the economic difficulties in many parts of the country, and the fact that "at kitchen tables across our country there is concern about our economic future."

However, his endorsement of a bi-partisan effort to pass a one-time $150 billion economic stimulus package in the next few days came with yet another call to also make permanent the tax cuts enacted in recent years that are set to expire in 2010:

"Unless the Congress acts, most of the tax relief we have delivered over the past 7 years will be taken away. Some in Washington argue that letting tax relief expire is not a tax increase. Try explaining that to 116 million American taxpayers who would see their taxes rise by an average of $1,800."

That sounds like a lot of very angry taxpayers, but Congressional leaders don't need to hide just yet. Someone once told me to be careful when you hear the word "average." After all, the "average" annual temperature in Iowa in 49.6 degrees, but that wasn't much consolation when the temperature dipped below zero last week.

Well, Congress can breathe a little easier. Here's how the impact of the 2001-2006 tax cuts breaks down for the 2007 tax year, according to the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution:

Income----------------Percent of Taxpayers-----Average Annual Savings
Under $100,000_______85%________________$ 656
Over $100,000________15%________________$ 5,616

Well this improves the odds a little. Actually, the over $100,000 category looks higher than it really is, since it includes the group with the top 1% or so of income (over $500,000) that received an average tax reduction of $54,687 each year under the Bush tax cuts.

Now that group is likely to be a bit peeved. But these tax cuts now add over $200 billion to our budget deficit each and every year, which is far more expensive than a one-time rebate. Maybe we can persuade them that they should sacrifice the windfall they've received over the past few years for the sake of an economy that is collapsing under the weight of our nearly $10 trillion national debt.

Source: Tax Policy Center
http://www.taxpolicycenter.org/index.cfm