On June 7, President George W. Bush signed a tax cut bill that funnels most of the benefits to the wealthy, eats up the projected budget surpluses for the next decade and beyond, leaves 34 million people who paid taxes last year without a penny in the highly touted rebates to be mailed later this summer—and offers a few modest breaks for working families.

Bush originally sought tax cuts worth $1.6 trillion over 10 years—though most estimates put the projected costs above $2 trillion—in a bill that would have given even more to the rich than the final package. During months of debate, the total package was lowered to a claimed $1.35 trillion and some modest improvements were made in the distribution of the tax cut.

Gimmicks hide true cost
The distribution of the final bill’s benefits is not its only major drawback. The real cost of the “$1.35 trillion” package is hidden by gimmicks and accounting maneuvers, according to the Center on Budget and Policy Priorities.

The center says the official price tag of the bill is “essentially fiction.” It estimates the true cost of Bush’s tax scheme to be $1.9 trillion through 2011. And because the tax cut will consume the surplus that could have been used to pay down the national debt, the center estimates that increased interest payments on the debt will gobble up another $400 billion, bringing the bill’s cost through 2011 to $2.3 trillion.

The real cost explosion will come the following decade when all the bill’s provisions will be in effect. The center estimates the cost for the tax cut from 2012 to 2021 at $4.3 trillion.

Millions left out of rebate
Backers of the tax bill claim it offers a tax rebate for everybody, but Citizens for Tax Justice estimates that tens of millions of people are left out of the immediate tax relief. CTJ calculates that 26 percent of all taxpayers, or 34 million people, won’t see a dime of rebate relief under the tax cut formula and that another 17 million taxpayers, or 13 percent, will get just part of the highly touted rebates.

Inequality expected to grow
Some observers believe the tax cut’s heavy tilt toward the wealthy will widen America’s already sizable income gap. The Center on Budget and Policy Priorities’ analysis of the new Congressional Budget Office report finds that the after-tax, annual income (adjusted for inflation) of the richest 1 percent of Americans grew by $414,000 from 1979 to 1997. During the same time period, the poorest 20 percent saw their after-tax income shrink by $100 a year, while those in the exact middle saw a gain of $3,400. In percentage terms, the rich saw a 147 percent boost in their annual, after-tax income, the middle saw only a 10 percent gain and the poor stayed just as poor.

The same study shows that the various tax cuts enacted during the same time period reduced the tax burden on all taxpayers, but the richest 1 percent saw the biggest drop in tax obligations. Coupled with the huge breaks in the new tax cut, it’s likely the income gap will widen quicker and further, the center concludes.

Some benefits for working families
Because the Senate forced changes in Bush’s original plan, working families will see some modest benefits under the bill’s terms.

These provisions include reductions in personal income tax rates for low-income taxpayers, including a new, low rate of 10 percent and improvements in the child care tax credit and the dependent care tax credit.

Working families are the taxpayers who need the greatest relief in order to better provide for themselves and their children, pay for education, health care and housing costs and, in the case of millions of families, to assist their elderly parents. The tax cut does provide some nuggets of relief. But analysis after analysis shows that the big winners are the people who need help the least—the nation’s best off and wealthiest.

Bush’s Millionaire Tax Cut Before and After Congressional Approval
Original Bush Tax Cut	Final Bush Tax Cut
If your income is among the… You’ll get… Top 1 percent (average more than $1.1 million a year) 45 percent of the benefits Top 10 percent of taxpayers 60.3 percent of the benefits Bottom 60 percent of taxpayers 12.7 percent of the benefits	If your income is among the… You’ll get… Top 1 percent (average more than $1.1 million a year) 37.6 percent of the benefits Top 10 percent of taxpayers 56.5 percent of the benefits Bottom 60 percent of taxpayers 14.7 percent of the benefits

Learn More
Find out whose rebate check is not in the mail.
See who benefits the most from Bush’s millionaire tax.
Look at the true cost of Bush’s scheme.
Who got richer during the past 18 years? It wasn’t the poor.