President Bush’s $1.6 trillion tax cut plan endangers vitally-needed social programs including education, health care, and possibly Social Security and Medicare. At the same time, the tax cut provides little relief to average women workers and disproportionately benefits the wealthy.
“The economic well-being of women in the United States is severely threatened by President Bush’s tax cut proposal. As both tax payers and recipients of social services, women have little to gain and everything to lose from this plan, ” said Eleanor Smeal, president of the Feminist Majority.
Tax Cut May Gut Social Programs
The tax cut, which is simply much too large, would deplete the federal budget for years to come. If the surpluses projected for the next ten years do not materialize, women will be hurt the most by the resulting cuts in social programs and/or in Social Security and Medicare upon which they rely more heavily than men. Even if the tax cut just increases the deficit, average working people would pay in the end with higher interest rates.
Little Benefit for Average Woman Worker
The tax cut itself is unfair to women, who are disproportionately represented in the two lowest income tax brackets. Under the Bush plan, the tax rate on the first $6000 earned by single people and the first $12,000 earned by married couples drops from 15 percent to 10 percent. While all workers in all tax brackets would benefit from this initial cut, the relief in marginal tax rate stops there for the average working woman.
The income tax bracket of $6,001 – $27,050 is the only bracket for single people that receives no tax relief. Women have a median income of $26,324, compared with men’s median income of $36,476. Single women heads of household have a median income of only $21,350. For married people, the comparable category of $12,000-$45,000 is the only bracket that receives no tax cut in the proposed plan. The median income for a married couple with only the male employed is $36,588 and for all families is $45,262. The tax cut for two wage-earner married couples, whose combined median income is $61,614, is also less than for those in the higher tax bracket.
Moreover, the tax cut penalizes low- and middle-income single people. For example, a $27,000 family income will get a $600 break from their marginal tax cut. A single person with this income receives only $300 marginal tax cut.
Wealthy Benefit Most
The Bush plan collapses the tax schedule from five to four brackets, combining the four highest income brackets into two and dividing the lowest brackets into two. This movement toward a flat tax benefits wealthy taxpayers and hurts low and moderate taxpayers. One-third of the tax cut benefit under the Bush plan would go to the wealthiest 1 percent of taxpayers; the top 20 percent will receive 71 percent of the tax cut benefit. Taxpayers with incomes over $297,301 will receive a 5.7 percent tax cut in total. However, single persons with an income of $6,001 – $27,000 will receive only a 1.1 percent cut and married couples with incomes between $12,001-$45,200 receive only a 1.3 percent cut.
Payroll Tax Cut Missing
The tax plan also provides no relief on the payroll tax. For most Americans and for most American working women, the payroll tax – not the income tax – is the single largest tax they pay on wages. The payroll tax is currently producing a surplus in Social Security Trust Fund to the tune of billions of dollars a year; however, there is no payroll tax cut. A more equitable tax relief solution that would not endanger the Social Security Trust Fund or social spending would be to both cut the payroll tax and raise the payroll tax cap.
“It does not take a rocket scientist to calculate that the average working women is getting virtually no tax cut, while Bush’s wealthy friends will get the bulk of the proposed $1.6 trillion cut,” said Smeal.