The Heritage Foundation

News Releases on Taxes

April 6, 2001

April 6, 2001 | News Releases on Taxes

Union Tax-Cut Ads Misrepresent the Facts, Heritage Analysts Say

WASHINGTON, Apr. 6, 2001-One of the nation's largest unions has taken a page from President Bush's playbook and carried the battle over his proposed $1.6 trillion tax cut to the home states of fence-sitting senators. But radio and TV ads now airing in Vermont, Maine, Louisiana and Georgia misrepresent the economic effects of the cuts, say tax analysts at The Heritage Foundation.

The Service Employees International Union claims the Bush tax plan would give 43 percent of the cut to the wealthiest 1 percent of Americans and "raids the Medicare trust fund to pay for it, leaving nothing for a real prescription drug benefit or for health care." It then urges viewers and listeners to call their senators and tell them to "protect Medicare and vote against the Bush tax plan."

In fact, plenty will be left to deal with prescription drugs, health care, Social Security and more, says William Beach, director of Heritage's Center for Data Analysis.

The Congressional Budget Office estimates the federal government's surplus will reach $5.6 trillion in the next 10 years. President Bush has proposed spending just $1.6 trillion on the tax cut, and Heritage analyses have shown that the dynamic effects of the tax-factoring in the consumer spending and business investment that cuts traditionally spur-would drop the "cost" of the entire package to less than $950 billion. That leaves more than $4.6 trillion to deal with future needs, Beach says.

As for the argument that the tax cut favors only the rich, Vermont residents need only consult the Heritage tax calculator at to find out there's something in it for nearly everyone who pays taxes, he says.

For instance, in Vermont, where the ads are intended to sway Republican James Jeffords and Democrat Patrick Leahy, such typical taxpayers as police officers, teachers and joint filers who earn the median income would enjoy significant savings under the Bush tax cut.

Once the cut is fully phased in, a police officer in Vermont with one dependent and the median salary of $45,000 would see her federal tax bill drop from $3,888 to $2,788. This $1,100 savings represents a 28.3 percent reduction in taxes owed and a 3.3 percent increase in household income.

Joint filers with two dependents and an income of $40,936 would see their federal taxes fall from $2,358 to $758-a 67.9 percent decrease and a 3.9 percent increase in household income. A teacher with one dependent and the average salary of $36,435 would see $1,100 lopped off his federal income tax-from $3,278 to $2,178-for a 27.6 percent decrease in taxes owed and a 3 percent increase in household income.

"Police officers, teachers and families making about $40,000 a year certainly aren't among the top 1 percent of all taxpayers," says Beach. "But ask anybody who works these jobs and manages a household budget-they definitely could use an extra grand."

In addition to collapsing the current five tax brackets into four and lowering the marginal rates of virtually all taxpayers, President Bush's plan calls for doubling the child tax credit to $1,000 and eliminating both the "marriage penalty" and the estate tax.

In Vermont, nearly 90,000 children would benefit from doubling the child tax credit and more than 60,000 adults would benefit from elimination of the marriage penalty. If President Bush's entire package were enacted, Vermont families would save $1.5 billion when the program is fully phased in.

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