October 13, 2003

Tax Cut Math

One of the more insightful passages of Al Franken's latest book, Lies and the Lying Liars Who Tell Them deals with the myths surrounding tax cuts. Franken presents these arguments as a dialogue between a waitress and a lawyer. I will paraphrase here, leaving some parts out:

Lawyer: How much do you make?

Waitress: $25k a year. And I'm not paying any taxes this year. Bush just gave me a $365 tax cut.

Lawyer: Sure, you're getting a $365 income tax cut, but you're forgetting the $3,825 that was withheld in payroll taxes.

Waitress: Oh, I don't mind the payroll taxes, because I'll get back every cent in Social Security and Medicare when I retire.

Lawyer: Bush raided the Social Security and Medicare trust funds to pay for my tax cut. He took a $4.6 trillion ten-year projected surplus and turned it into a $1.8 trillion deficit. Say, do you have kids?

Waitress: Two! Teddy's six. He has some learning disabilities, and Debbi's two. Quite a handful for a single mom like me.

Lawyer: You know, my oldest son has a learning disability, too. Good thing I have him in private school, because the public schools are cutting back on special ed.

Waitress: Yeah, I know. They told me that next year Teddy's not getting special ed. Also, they're cutting the after-school program.

Lawyer: That's because Bush proposed cutting the 21st century community learning centers by forty percent. You may be saving $365 in income taxes, but that after-school program was spending $700 per student. So in a sense, you are already down $335.

Waitress: But he cut my taxes 100 percent!

Lawyer: If I were you, I'd be thinking about health care. Here in Texas, the're reducing eligibility in the children's health insurance program from $30,520 down to $22,890. So you are losing health coverage on both your kids, which was worth about $2,896 right there.

Waitress: But what if my kids get sick?

Lawyer: Just hope they don't. Because of the huge tax cut, the federal government can't fulfill its normal obligations to the states. Since you are a single mom on a fairly low salary, you must live in some subsidized housing, right?

Waitress: Yes, we get a section 8 housing voucher in the mail every month.

Lawyer: I'm afraid that's about to disappear. If you live in a two-bedroom apartment with minimum amenities and rent in about the 40th percentile range, that works out to about $747 per month.

Waitress: That's about right.

Lawyer: So your voucher to help cover 1/6 of your housing costs for a year is worth $1,464. Sorry, *was* worth. So now, less your tax cut, you are down about $4,695.

Waitress: Well, as long as I have some child care, I can at least work without worrying about my kids, right?

Lawyer: Texas is getting less funding for its Temporary Assistance for Needy Families. So they're cutting back on Child Care and Development Block Grants.

Waitress: But I don't get block grants.

Lawyer: Yes, but your child care provider probably does. Or did, I should say.

Waitress: Are they doing something to my bus route to work, too?

Lawyer: Probably. The state senate just cut public transit funding by 29 percent. They were going to upgrade the buses to cut down on the toxic emissions. Now they're keeping the old buses and raising the fares.

Waitress: Debbi does get asthma on bad smog days.

(long pause)

Lawyer: Well, I should get back to work.

Waitress: So I take it you're not voting for Bush next time?

Lawyer: Are you kidding? I make $250k a year. I love Bush!

Waitress: How big is your tax cut?

Lawyer: $6,000. That's about sixteen times as much as you. And of course, the program cuts don't affect me. But the big payoff comes when my mother passes away. If she can hang on until 2010, I'm getting $12 million. Tax free. That's about a six million dollar tax break.

Waitress: Oh, the repeal of the death tax. I guess that's fair, because that money was already taxed once when it was earned.

Lawyer: Oh, no no. It's mostly capital gains. Never been taxed, and now it never will be. Unlike your tips.

Posted by Observer at October 13, 2003 07:00 AM

Comments on entries can only be made in pop-up windows while those entries are still on the main index page. Sorry for the inconvenience this causes, but this blocks about 99.99% of the spam the blog receives.

Let's not forget the increase in local taxes (income - where applicable, property, and sales) to pay for all of the federally mandated (but not federally funded) "Homeland (in)Security" initiatives for local police and emergency response divisions.

(You have a typo toward the end where the Waitress says she's making $250K, not $25K. Sorry to be a stickler. :-P)

Posted by: Perkusi on October 13, 2003 09:11 AM

Yeah, I left out jacked up property taxes (which are passed on to renters, of course), jacked up sales taxes, licensing fees (esp. for cars), etc. States have to make up the revenue somehow just to keep a basic level of services, and it usually ends up being a lot more regressive than federal taxes.

Not a typo at the end, I think. That's the lawyer's salary. 10x higher than the waitress.

Posted by: Observer on October 13, 2003 09:26 AM

Oops! My bad. I read that as the Waitress's line.

Posted by: Perkusi on October 14, 2003 08:05 AM