Focus 580; Tax Cuts: Good or Bad, How Much and for Whom?

Good morning welcome to focus 580 This is our telephone talk program money David. And we're glad to have you with us this morning on the program today we have one topic for both hours of the show and we will be coming at it from two definitely different perspectives this week. As you probably know President Bush unveiled his first budget and as part of that his proposal for a rather substantial tax cut to 1.6 trillion dollars over 10 years something that really wouldn't shouldn't come as a surprise to anyone during the campaign Mr. Bush said that if he were elected he would certainly ask for a tax cut. I would also propose some other things including an end of the to the estate tax and to what has been called the marriage penalty. And this has been a contentious issue you know going back some time with people some people arguing that the problem with this kind of tax cut is that it benefits mostly the wealthy and on the other side there are people they tend to be Republicans who say that the kind of cuts that Mr. Bush has now proposed aren't

enough that there should be bigger. Certainly they many Republicans do indeed support the idea of getting rid of the estate tax. So we're going to try to talk about it this morning with two guests who definitely as I said have have two different perspectives in the second hour. You'll be hearing from Dan Mitchell He's an economist at the Heritage Foundation in Washington D.C. He'll be joining us by telephone here in the studio with us for the first hour of the program is Mark Weisbrot. He is an economist. He has a Ph.D. in economics from University of Michigan. His special area of interest International Economics and Political Economy. He's currently co-director of the Center for Economic and Policy Research in Washington D.C. He writes a weekly column on economic and policy issues that is distributed to over 400 newspapers by Knight Ridder Tribune Media Services He's also co-author of co-author or author of a couple of books the most recent titled Social Security the phony crisis that came out in

2000 last year he's also the author of a book titled One year after Seattle globalization revisited. So if you're interested in reading some of his writing on the subject you can go out and seek out his books. And as always here on the show questions comments are welcome. All we ask of callers is people just try to be brief just so we can keep things moving along. But Anyone's welcome to call here in Champaign-Urbana 3 3 3 9 4 5 5 toll free 800 2 2 2 9 4 5 5. Thank you for being here once again. I don't know where where you want to start. Just if you want to give a general critique of the tax proposal that the president has made well sure you have first of all about 43 percent of the benefits will go with this tax cut it would go to the top 1 percent of taxpayers the richest 1 percent of taxpayers who have an average income of about nine hundred fifteen thousand dollars a year. So that's the first thing

I think that most people see as really unfair and this is an enormous amount of money going to a small group of people who already have a lot of money. And and it's even worse than that because if you look at the last two decades of economic history in the United States what you find is that this group the top 1 percent actually more than doubled their real inflation adjusted after tax income. So this is a group has done enormously well and taken a huge piece of the economic expansion that we've had in the last 20 years. And at the same time and this is really unprecedented in our history. You have for the bottom half you know the 50th percentile. Of wage and salary earners have actually gotten nothing out of the economic growth that is the the median wage today. You

can buy just about what it bought twenty seven years ago. So so everybody from the median wage on down has either stayed about the same or those jobs the pay stayed about the same or it has actually fallen over the last couple of decades. So to come at this time and rewrite the tax code so as to shift even more of the burden of taxation from the wealthiest taxpayers to people who haven't gotten anything. I haven't shared in the gains from economic growth is is really quite outrageous thing to do at this time. I suppose that some people would make the argument that it's perfectly appropriate for the wealthiest people to get the biggest share of the tax cut because they pay more in taxes than people who make less money. That is they're paying the most the biggest share of the taxes so why should they get the bigger share of the

cost. Well there are several answers that I mean first of all they're still getting way more than even proportional to the share that they pay. So if you look at all federal tax taxes that top 1 percent is paying somewhere around. 19 percent federal taxes and getting 40 percent 43 percent of the tax cuts so it's not even proportional there. Secondly you know and you probably have your guest on the second hour will try to say otherwise but what those who are people and favor the tax cut are doing is they focus only on income taxes where and so they can they can say well the top 1 percent pays a larger share than in their 19 percent because they say you know they're only looking at income taxes. But in fact four out of five taxpayers are paying more in federal payroll taxes that is so

security in Medicare than they are in income taxes. So if you look at all federal taxes there's still an enormous amount paid by all taxpayers really all the way down to the bottom. And that's where the cuts should be made. The other answer that I should say is that if you look at what's happened again over the last 20 years you have. It's true an increasing share of taxes have been paid by the. The upper income groups by the wealthiest groups and that's because their share of the income total income has increased so rapidly. So that's what has to happen if you leave the tax code alone and all the gains from economic growth are going to the top you know 10 or 20 percent of the income distribution as they did in the 80s. Then people in that part and of course a huge part going to the top 1 percent people in the people

with that kind of money are going to pay a larger share of the total taxes because they're getting an enormously larger share of the total income. So if you come back and say oh you don't like that they're paying so much of the taxes which is what the Republicans are doing and say we have to change that then what you're doing is you're saying that every time income and wealth is concentrated upward that you're going to come in rewrite the tax code to do to make that even worse so that they don't have to pay a larger share of the taxes. So you make the argument that says it's supposed to be a graduated system. So if people you know and people pay in proportion to what they make well if people are making a lot more than they should be paying. Yes. What do you think of that. Some I think some people are concerned they say well we're talking about 1.6 trillion dollars over 10 years that means 1.6 trillion fewer dollars going to be coming into the federal government to pay for various kinds of federal programs and they're concerned that at some point if if money gets tight if the economy slows down then somehow we're going to be in trouble because we're going to and we're not going to have that money to do the things

that government is supposed to do. Among them pay Social Security benefits. Is that a worry. No that's actually not true at all. And it's unfortunate that the Democrats have arrested so much of their argument on this idea because. Because it wasn't true and I think that's why they lost a lot of steam when. Alan Greenspan the chair of the Fed came out and said that you know the tax cut was affordable and he was right it isn't a question of fordable It's a five point six trillion dollar surplus now. Both parties have to varying degrees but especially the Democrats have assumed that you have to use the 2.6 trillion dollars of Social Security revenues to pay off the national debt. But there's no reason for that. That's just that's just a little trick that they came up with back you know a couple years ago to try and defeat

this tax. And this is the this is why I think it's very often I think people forget this. It's very often just better to be honest about these things. And and in this sense the Republicans are I mean they're not honest about who's being who's going to get the benefits of the tax cut or anything like that but they go and they fight for what they want. And I think it would be much better if the Democrats Democratic leadership were willing to do the same thing I mean here we have you know this is an enormous surplus I mean we're in a position now. That we've never been really in the whole post World War Two period. And if you look you know you compare this to 35 years ago when you had the president of the United States declaring a war on poverty. You know it's now thirty seven years ago. You know this is we're in an enormously better position to take care of all the major problems that we have you know with

this tax cut we could have national health care for everyone for example. We could really get rid of poverty which is what President Johnson said he wanted to do in 1964 and everybody assumed that was doable. Well now we have 70 percent more income per person than we had then and we have this enormous surplus So I mean the real debate should be about what can we do. For this country at a time of unprecedented national prosperity. Now I realize the economy is slowing down now and we don't know what the next couple years are going to be but this is a long term projection. And even if it turns off turns out to be off by a trillion dollars it still wouldn't matter. There's a lot of money there to to really tackle some of our most pressing social and economic problems. I probably should introduce Again our guest with this part of focus 580 Mark Weisbrot. He's an economist. He's co director of the Center for Economic and Policy Research in Washington

DC and has visited with us from time to time to talk about economic and political issues. We're talking about the Bush tax cut proposal this week. The president proposed a 1.6 trillion dollar cut in taxes over 10 years. And this morning on the program we're talking about with two different guests who have two different views in the second part of the show. You'll have an opportunity to hear from Dan Mitchell He's a senior fellow in political economy at the Heritage Foundation in Washington D.C. He was joining us by phone. And you can do the same join us by phone that is if you have questions comments. 3 3 3 9 4 5 5 toll free 800 2 2 2 9 4 5 5. Well if if you make the argument that says of the problem with the tax cut is that the benefits go to the people who are on the top of the income range and you have said the same thing that. A number of other people have said including I think that the people that are getting maybe the most attention have been a lot of mentions of this in news coverage of the tax cut this organization called Citizens for Tax Justice. I have looked at this

and they basically have said the same thing wealthiest 1 percent of all taxpayers here on their website it says and I quote the wealthiest 1 percent of all taxpayers get an average tax reduction of fifty four thousand four hundred eighty dollars a year forty five percent of the total cost and I'm not sure exactly how it is that they they figured that out but the bill is actually their numbers and their model is a very good model and that's actually what's being used by almost everyone and to be so. So if we say that's the problem with this tax cut and that we would like to do something that would be that would benefit everybody else particularly the people on the bottom as they say for example the bottom 20 percent under this plan the bottom 20 percent would see an average tax cut. Forty seven dollars a year as compared to the $54000 of people on top. So if we want to do something for the people on the bottom and what would be better in your estimation what would be better than this. What would we do.

Well there are a lot of things that would be better. I mean by the way the bottom 20 percent if you look at their numbers there and I don't know what you have but I think the bottom 60 percent. It would end up with a tax cut of you know a couple hundred dollars two hundred twenty seven dollars and ever get it. Yeah I think it was taxpayers in the lowest 60 percent of the income scale. They get twelve point seven percent. Their average annual tax reduction two hundred fifty six dollars. So then the bottom 20 percent. Forty seven dollars. Yes. So even you know even for the majority of tax payers there's hardly anything there at all. And so there are a lot of things you can do first of all. I mean I don't think it's a good idea to rewrite the tax code. It's necessary to do that at this time. If you know if you look at what the administration is saying they're saying we need this tax cut to stimulate the economy. And that is a valid argument except not for this tax cut because it's way too slow and it's way too skewed towards the top. What you could do is just have a rebate for

everyone which could be very quick. Everyone gets a check. $500 per person. That would cost about a tenth of this 1.6 trillion dollars and you could see if you needed it next year. Maybe we won't. Maybe the economy will be growing quite rapidly next year we have no idea. And this would be everyone gets a share of the you know be a prosperity dividend. This would be fair. A family of four. A typical family of four instead of getting the few hundred dollars they would get under this five years from now they would get an immediate $2000 and they'd go out and spend it. And that would be the best thing you could do for the economy right now. Let's take a couple callers here. We have somebody on cell phone so I hope that first caller will mind if I go to the cell phone person first line number four. Hello. Yes. Yes go ahead. I guess my question twofold I hear from

people that the third biggest thing in the budget is. On the day that I need to know if that's true. And then my question is if the top 1 percent tax cut were exactly half and that were distributed among people at the poverty line below what would people below the poverty line get. OK I got a first question I wasn't quite sure about the second one. We hear about how much the people in the top 1 percent would get. Fifty four thousand dollars. Yes. OK if their tax cut were exactly half and that money was distributed to the lower end let's say people I think people are very little. Right OK we're I'm sorry we're we're sort of losing that the color but I think we get we got the question His question was OK. And we're saying that the people in the top are getting a tax

reduction of fifty four thousand dollars a year. Supposing that we cut that in half and we said OK we're only going to give them twenty seven thousand and the other twenty seven thousand. We're going to take all that money and then we're going to split it up and give it to just give it write a check and give it to the people on the bottom. How much do those people get. Yes well I would have to do the math for that. I was thinking about the arithmetic that's why I had a hard time with the question. It would be significant though it would be a lot more than what they're getting right now I could tell you that much. Let's see what would you have well I mean you know you can look at it this way right now that 27000 per rich household comes out to be about 20 percent of the 1.6 trillion dollar tax code. So that would be about three hundred and twenty billion dollars that you would have to distribute again among whatever group of people you're talking about so it's quite a bit of money. You know it would

depend on the size of the group you're distributing to but it would be you know several times more than what they would what they're getting right now. And many of them of course are getting nothing at all. I'd have to do the math to give you an exact answer and get an exact number for the people you're talking about but just imagine that three hundred twenty billion for example distributed amongst say I don't know 10 million people or. Well that would be you know it would. That would be people in them that's an enormous amount of money. You know so. So it is it is quite a bit. No. What was the other the first question. Let me check back and see is that when we lost the caller and I have to have to apologize I'm afraid that I lost the last the first question myself. Our apologies to the caller. If you would like to call

back we'll make sure that we get this question. Let's go to another caller here. This is Champaign County line number one. I don't remember it either. I don't think the latter question was a particularly serious question I think so you haven't gone on a so. Range which I guess we're fortunate for he would have it with I think it was a rhetorical device to talk about. It's just redistribution and it's ignoring all the structural redistribution that's already in corporate welfare. The fact that a lot of what big bad government does actually benefits. The investor class much more than anybody else and the redistribution if you look at it from a more totalistic point of view I think you'd agree it's actually pulling money out of the poor and putting it into the rich and that the government is actually helping in this in most ways. But I think that's just a suspicion and as they say that isn't what I want to respond to. I went through this I don't know what

website you were calling authoritative I went to the Citizens for Tax Justice which I guess gets held to be a union front for something worse when Corporations fund think tanks they're never called. Well not often in the regular press called slack use for corporations but their analysis shows that something like I think it was 37 percent. People won't even see a tax cut. That these aggregates. Talking about a rather difficult to in a region that averages over certain percentiles I think the plan has a 15 percent for the 15 percent bracket includes only a lowering to the 10 for the lower part and that the upper part of that 15 percent bracket. If they get anything at all it'll be related to tax credits for children and that sort of thing that they won't see. And there is another thing about upper middle class range which I forget which bracket that is. There's an old thing called an

alternative minimum that would apparently still kick in and that it would be sort of a fictive fictious reduction for them. And I don't know if you can handle those. I want to have to hang up and listen on the air. The rebate is proposed by the Progressive Caucus has got a lot of press and I think they have the CEO has signed on to that. The Democrats and what I'm asking you here is for you to characterize what the other proposals for tax cuts have been. You mentioned the rebates but you could probably amplify on that. The Democrats proposed I think taking the entire 15 percent bracket down to 12 which would make more of the working poor actually see this. I see some kind of relief. Due to my earlier characterization is correct. So thanks for the work and if you might also do something proactively and dissipate any of the heritage Heritage Foundation and current arguments on this

since it was an hour with them as well. Thanks for your work. OK thanks for the go. Well that's quite a bit less quite a number of topics that I'll try and address as many as I can. The Democratic plan to reduce the first caller's right that the 15 percent tax bracket reduction only applies to the first $6000 of income and $12000 of income for a couple six thousand for an individual. So that's one of the reasons why families at the lower end are just you know even around the median would not get very much from this tax cut because the that reduction is limited whereas the other reductions like the one from the top tax bracket for example of thirty nine percent down to thirty three pies to all of the income of those people in that category. So and so the most you would get you know if you were in this you know lower

range lower to middle range of tax payer in the 15 percent bracket which is the biggest category of taxpayers actually are in that bracket or below. You would get you know 15 percent of $6000 for your That's the biggest break you get from the marginal rate reduction. So that's one of the reasons it's kind of small just to give you an idea how people the working poor are and not even the poorest of the working poor if you take for example a single mother making $11 an hour working full time all year round. She would actually get nothing at all from this tax cut with two kids. She would get nothing from this tax cut. Not even the child tax credit because you already have to be paying the federal income tax to be to get the child credit now this person is still paying federal taxes probably over

twelve hundred dollars a year in the federal payroll payroll taxes even after she gets a refund. For the Earned Income Credit. So that's an example. And that's an example people you know who need the money the most are really not going to get anything at all. And this could be resolved by simply expanding the earned income credit that is the purpose of the earned income credit is to refund some of the money that people pay in the federal Social Security and Medicare taxes which start at the very first dollar of earnings and go up to you know seventy two thousand or so people at the bottom could get there that way that would be a much more fair tax cut if you were going to rewrite the tax code is to just refund more of those payroll taxes. Now the Democrats have proposed that as well as an alternative reducing the 15 percent

bracket to 12 and I think that would be fine and that is a much bigger tax cut than the one that's on the table. As for anticipating some of the arguments that the next person. Will make. I try to do that already by saying that they will focus on the income tax when they talk about how much the richest 1 percent pays and ignore the payroll taxes and they'll try to make the argument probably that again since the income tax is paid primarily by at least households you know 90 something percent of it is paid by households in the top half of the income distribution. That this is going to who is who is going to get a tax reduction but again the flaw in that argument is first of all we're not just talking about income taxes. We have most families are paying more money in payroll taxes than they are in income tax and so they could get a rebate refund of those payroll taxes. And

second of all they are also by the way still talking about and the Republicans are still committed to removing the estate tax which is not an income tax and it's a tax that applies to only about 2 percent of total taxpayers. And the richest 2 percent. And this is you know this is something that makes up about a quarter of the total 1.6 trillion dollar tax cut and it's an enormous giveaway. David you might have seen that the it was opposed even by say you know a whole list of billionaires like George Soros and Warren Buffett and Bill Gates. I mean I was like him because you know I wrote I wrote a couple of columns on this tax cut and and they went in papers you know all over the country in Miami Herald and other big city papers ran and and I got a lot of mail as a result from people who you know don't like to pay taxes. And they all very often accuse me of being envious of the rich.

And I had to ask them you know is Warren Buffett envious of the rich. I mean you really don't have to. This is just a question of basic fairness you don't you know it's and also used to be a fairly conservative idea too that you should have an estate tax when it was enacted in one thousand sixteen. The idea was you know the conservative idea that people should have to go out and earn their money. As opposed to getting this enormous gift of the inherited gift I think some people to wit would make the argument that if you're really concerned about this issue that sometime soon I forget what it is that this happens that the figure of the state that you can have and not pay taxes I think is going to go to a million dollars you could have a million dollars right and 2 million for a couple right. So some people are saying well OK let's let's make it 5 million. That and that would take care of again a lot of people that even now are you know the people that maybe we're concerned about things like farmers small business people. So you could in a

sense provide relief to those people without getting rid of the estate tax completely. Anybody who's really talking about well let's go ahead raise there are several million dollar proposals in Congress now to raise the four million but you know it's interesting that even under the current exemption which is only six hundred seventy five thousand per person and double that for a couple in 1998. There are only seven hundred and seventy six taxable estates in the whole country less than 1.6 percent of the total in which the majority of the estate consisted of family owned business assets. And the number was even smaller for farms. So it really is a very very tiny number of people who have most of their assets either in a small business or a farm or I mean even a small business but a family owned business or a farm that are being affected by the state tax even know we are a little past the midpoint.

I have two callers will get right back to you and in fact I think we had the man on the cell phone is calling us back so my apologies for not having written down his question will it we'll see if we can get to it. Other folks are welcome to and I guess I should introduce our guest We're talking with Mark Weisbrot. He's an economist and is co director of the Center for Economic and Policy Research in Washington DC. He does indeed write a weekly column on economic policy issues that appears in many newspapers across the country. And we're talking about the proposal of the president for this tax cut 1.6 trillion over 10 years and again I do also want to mention that you will have the opportunity to hear another guest with a different point of view. Second our Dan Mitchell will talk with us by telephone. He's with the Heritage Foundation Washington D.C. Let's get back here to a caller here on line number one. My apologies to you sir for not having noted down your questions so I think we probably didn't get to it and if you want to come back to it or whatever go ahead. That's no problem I was I was in a bad location I'm parked on a hill now.

OK we got your loud and clear. Yeah. The first part of my original question was. Is interest on the debt the third morrow yes. But yes entitlements first defense second interest or yes I've heard that all through the years but I thought it was still the case. And secondly. My question was a rhetorical was about a kind of redistribution of assembly about what's to be done with this tax cut and I think if it if it is left to the operand and more to the lower end it will be infused immediately into the economy. I don't think anybody can argue that point. People who live at or or at one to two times the poverty line will spend that money. Yes they'll spend it when they get it. No that's why I favor giving the definitely that kind of a refund. First your first question so we don't lose it again. Yes it could still be the third. I would be very close I'd have to look at the very latest

budget that the president proposed but it would be close I mean it's around two hundred twenty billion a year. That would be very close to Medicare and Medicaid spending as well so it would be you know if it was more than I think it's probably now fourth or fifth. But it's you know it's right very close to 30 I mean the biggest of making. Is that if we focused on debt reduction early. And I'm not saying the all for debt reduction but if we focus on that reduction really there's an automatic return in latter years when when freshly elected representatives of the people can determine where that money goes. Yes but you have to understand OK this is worth a little bit of time because as I said the Democratic leadership often drive. OK thanks. Thanks for your call. Thank you. The Democrat since the Democratic leadership is focusing so much of their argument about paying off the debt. This is what we have to do. It is

important to look at what are the real costs of the debt and the benefits of paying it down. And the caller is saying which you know many people have tried to argue that saving the interest payments on the debt will give us a lot of money in the future in order to you know take care of other things. And that's really if you look at the actual number Well let's take a look at the number that two hundred twenty billion dollars a year if we project out you know 10 years when we get rid of that that will be about 1 percent of our national income. So you know that's. That's not really worth it for you know to save that one penny out of every dollar. And to say that we have to for 10 years forego doing anything about health care education or poverty because that's what you're saying. If you're going to commit

the federal government to paying off the entire national debt I just don't think that's worth it at all it's it's you know it's kind of like if you if you have a mortgage and anybody who has a mortgage could want to pay off their mortgage early and there's some benefit to that you would save on interest payments. But the question is would you forego sending your children to the doctor or getting them a college education in order to pay your mortgage off early and most families would say no. And that's exactly what you're doing and quite literally because you now have 10 million children without health insurance in our state. You're saying it's more important the best use of federal dollars is to buy up bonds and I just don't think that makes any economic sense. And just to respond I did the arithmetic for his second question. If you were to distribute that money he was talking about the $27000 per person in the upper 1 percent to say the 10 million people at the bottom it comes out to about thirty two hundred dollars per

person. OK. We have other callers. Let's go next to Bloomington cause pain patient here in line for Hello. Yeah why to start with the question what proportion of this tax cut would the upper 5 percent account come level getting cut it off there. At what income level would that be. Yeah. Well let me see if I can answer this again. Again I'm looking at some figures here that come from this. So organization Citizens for Tax Justice Well they said the top 1 percent 3 percent will get 45 percent of the tax cut and then the next 4 percent will get seven point eight percent so if you want to top 5 I guess that takes us to what about fifty to thirty two point eight when I get there right. Well over half. That's about right and 51. Forty three and seven point eight. Yeah. So that's fifty point eight. Yes about that.

Yeah. OK well it looks to me over half here that with the huge concentration of wealth that is being created over the past decade and even longer in those income categories. Seems unconscionable with me to spend all that money back to that particular area. And I agree with the earlier point you made. I know many middle income people can't even afford health insurance. We are even talking about single payer national health insurance. Seems to me that a tax cut or or a tax structure is one of the most worthy goals of the income redistribution. When you look at the huge. Degree of gap between the rich and the poor people in our society and I guess it comes down to the usual thing in politics for so long and that is the political contributions are producing the kind of attacks. Oh we have here. That's

about what we should fact given the fact that the average person has no quit. No I agree with that very much. And it is interesting that you do have in spite of the fact that you have almost no political leadership out there saying that we should use this money for health care and education in the latest polls you see in some polls even a plurality of people saying in fact that they would prefer that to the tax cut. Right and how many of these middle income people that supposedly think that they're going to get rich some day benefit from this kind of attack that are really ever going to end up in the top 1 percent or even top 5 percent. I think that's incredibly naive. That's right. But it really is true I think that if and this is why I think it's so unfortunate that the Democratic response to all this has been to just insist on paying down the debt because I think if they did take the position that the caller is advocating that this money should be used for something like health insurance I think they would have enormous support.

Well I think the thing that so many don't get it back. These party distinctions are insignificant and big money that basic. They affect the behavior of people in both parties I agree with you that those arguments are very extremely poor the Democrats are making and these proposals to simplify the tax code for the most part are just that's just a code word for realizing the tax structure to favor that top line 5 percent. OK well appreciate the comments I don't know if Mark wants to mewe want to comment at all I think that is true I mean this is this is a very fundamental problem in American politics. Is it because we have our you know this kind of system of legalized bribery where campaign contributions determine what politicians position on most issues is you have this problem where. You know for example the Democrats could in fact play to their own base and propose a

kind of a populist program that would have enormous support and would benefit them even as a party. But because they're constrained because they don't want to offend the large insurance companies for example who might lose in a national health care plan there they have to come up with these kind of debating tricks in order to try and defeat the tax cut and so they've relied on this for a while first they start talking about how we have to save Social Security which you know of course is not true at all I mean there's nothing wrong with Social Security when they started talking about paying down the debt until it finally became this whole web of kind of nonsensical answers to something where they could have just said no we don't we don't want to give this money to the people who have gotten most of the gains from economic growth. Why don't we do something for the majority of Americans and some of them are saying that I mean you know there's just it's not their major argument. Where is it. It

could be and should be I think. Ten minutes left a bit less. Our guest is Mark Weisbrot. He's an economist with the Center for Economic and Policy Research in Washington D.C. We do have two people holding a will try to get him both in the time remaining in this our next caller in line is in Chicago on the line to draw. Yes I go along pretty much with your argument. You've already mentioned a number of areas where the money could be better spent and to cut taxes for the wealthy interests. And health care and education and so on. There are a number of other areas where we're going to face the country. This is going to face is already in an danger of facing huge problems not just in mass transportation and energy and the environment in general. Money is going to be required I'm lest we let those of the country go to pot

entirely. What I wonder is whether you have a figure. The costs of these particular areas that would take clusters to make things right. Yes I don't have a figure on that I mean if you look at though at the proposed budget that just came out yesterday from the Bush administration. Of the Environmental Protection Agency which by the way gets about one third of 1 percent of the entire budget. They're actually proposing to cut that budget by 6.4 percent so clearly this is not a priority at all right now and I think it should be. That's as far as you can go. Yes I don't know if it is readily available. No I haven't seen anything quite like that. OK thank you.

All right thank you we'll go to load up for another caller here line 1. Hello. Yes I mean I'm interested in the number of tax payers that are actually included in the phrase if you pay taxes you should get a tax cut. Could you tell me how many taxpayers we're talking about. Well I don't know who they mean I mean all everyone. Pays taxes. You have your income. I'm going to tell you income tax. Yes. The actual number that pays the federal income tax. I'd have to look at that but I would say it's probably it's over I would say it's at least over 60 percent. That pays maybe over three quarters probably even. Yeah somewhere around there that pays federal income tax. So what what number would you give me a number of total tax filers. Yes.

Well. I give you a ballpark estimate. You know maybe 90 90 million you know something like that. That's just a rough guess though. OK. Thank you. OK thanks for the call let's go to again another caller here this will be on our line number two the caller is in Urbana. Hello. Oh is that a yes. OK yes I'd like to see if I understand correctly the connection that people are trying to make between the economy going down let's assume that that's the case and the tax cut as I understand the logic in very simple terms. He cut the taxes people have money people go out spend the money. The spending money creates a demand. Industries respond to the demand by hiring more people and producing more products and the economy goes up is that basically the argument. So could you tell

me what are the defect if any lies in the argument. No I think that's the basic argument the defect in this particular tax cut is that it takes quite a long time before anybody actually gets the extra money in their hands and you don't know really what the economy is doing at that time. But again if you were to do something like a rebate and it was immediate it would have and especially if it went you know like the one I suggested to you know per person it was a person rebate so it really went to the majority of people and people who are cutting back on their spending right now because they're worried about the economy. I think it would have a significant impact and would be a good thing to do. OK thank you very much. All right thank you. Maybe this answers and you can tell me what you think about this number the question the previous caller and again here I'm on the Web site of Citizens for Tax Justice Here's a page where they're breaking down who gets the tax cut according to

demographic categories like people who are married and file jointly. People who are aren't people who have kids people who aren't adding up all the numbers of all those people the bottom line is a little over one hundred eighty seven million. Taxpayers does that. That's only reason number as it's been told that's what they said the total number of tax if you add all these very various categories does that sound like I see the problem with the sleaze that makes it a little more difficult to sort it out and that's what I had to just give a really rough guess is most of them and the tax stats are usually there by filers. So so that I think those might be tax returns and some of those tax returns are families and they're not separated out. So yeah so. But my estimate was probably to show that it is probably which is probably higher than that. But I really have to look at it it would have to you have to. It is hard to

sort out the exact number that he was looking for. Well I guess we're just about at the point we're going to have to stop. It certainly seems to be the case that the Bush administration and Republicans in Congress would like to see this. I would like to see a tax cut happen and that apparently some Democrats I think would be willing to go along with some kind of tax cut now are getting to the point we're going to argue about numbers. What do you think's going to happen. Will there be some cut and it is just now a case of weird we're just talking about how we're arguing price here. Yes well. I think there will be probably some tax cut. But you know it is very hard to predict these things. That's why I try not to make these kinds of predictions because it changes the political situation changes very rapidly I never thought I would see the kind of polling data we've seen in the last week or so or even the situation where they're not sure if they can get the tax cut as currently proposed passed the Senate for example.

So I think it's very fluid right now it's very hard to say if I had to guess I would say some tax cut will pass. It will be bad in the sense that there will be rate reductions that will redistribute the burden of taxation from the wealthier taxpayers to the less well-off. We're going to we're going have to leave it at that with our thanks to our guest Mark Weisbrot from the Center for Economic and Policy Research in Washington. If you're interested in finding out more about his organization they have a website you can go there and also read some of his his op eds that have appeared in newspapers across the country that and they have other sorts of information so yes it's a C E P r dot net. That's c e r dot net. OK. And in the next part of the show we'll have some more talk on the same subject Dan Mitchell will be joining us by telephone. He is an economist with the Heritage Foundation in Washington D.C. So you can

stick with us.