Latest GOP Tax Cuts

Brewtown Politico links to the Washington Post analysis of the latest round of GOP tax cuts, including a nifty little table summarizing the savings. My summary: for most Americans, i.e. those making less than $100k per year, these savings will help buy anywhere from a partial gallon of gas up to several tanks of gas per year; for the wealthy, they can buy a whole car.

I've always found this kind of analysis misleading. Obviously, we would expect the wealthy to have a larger absolute dollar savings in any tax cut, because they pay more to begin with. Cut everyone's taxes 5% across the board and the wealthy will save a lot more dollars than the poor. So showing the real dollar savings doesn't really tell us anything about the cuts.

A more meaningful analysis is to normalize to percentages. Below is a table taking the Post data and taking the ratio of savings to the low end of the income range given:

Income Range (thousands)	Tax Savings ($)	Percentage (%)
10-20	2	0.02
20-30	9	0.05
30-40	16	0.05
40-50	46	0.12
50-75	110	0.22
75-100	403	0.54
100-200	1388	1.39
200-500	4499	2.25
500-1000	5562	1.11
1000-	41977	4.20

As this table shows, only those making more than $100k have anything resembling a noticeable savings. But even the very well off (those around $750k per year) get screwed relative to the truly wealthy.

Senator Frist argues for the cut saying, "Keeping taxes low helps Americans find and keep work, supports families and communities with good job bases, and makes America a great place to do business for companies both here at home and those overseas looking for a place to invest." Yeah, that extra tank of gas per year will really help working Americans support their families.