Since the economy is set to be a key issue in the general election, tax policy will be a major point of departure for the two eventual nominees. Both leading Democrats have pledged to end the Bush tax cuts arguing that they only benefited upper income tax payers and that they also starved the government of needed revenue. Both arguments are false.
On the wealthy’s share of the tax burden Heritage Foundation Center for Data Analysis director Bill Beach notes:
The top five percent of income earners paid 59.7% of all income taxes in 2005, which was the highest percentage in the past 20 years. Tax share records were also set by the top 10, top 25 and top 50% of income earners. In other words, every category of high income taxpayer as defined by the IRS paid a higher share of taxes in 2005 than they have since 1986, the earliest date for which the IRS provides data.
On government revenues since the 2001 tax cuts Beach points out:
The CBO provides data on revenues as a percentage of GDP from 1962 through 2007 and forecasts of the revenue percentage for 2008. Since 1962, the long-term percentage has been at or near 18% of GDP. In 2000, this percentage stood at a whopping 21.4%, its record since 1962. … Then the recession set in and revenues dropped steadily through 2002. By 2003 the slow economy and the tax cuts of 2001 had reduced the percentage to 16.1%. Congress cut taxes again that year. Interestingly, revenues began to respond to the stronger economy that the 2003 tax changes encouraged. … By 2005, the percentage had climbed to 17.4%. By 2007, they had risen again — to 18.6%. For 2008, the CBO expects the revenues as a percent of GDP to stand at 19%, significantly above the long-term trend of about 18% of GDP. … If there was anything that starved Washington of revenues, it was a sluggish economy, not the tax cuts.