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What The Media Tell Americans About Free Enterprise

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September 1997


Who Pays Taxes? Donít Ask Networks
Summer Tax Coverage

Those who oppose across-the-board tax reforms and cuts in the capital gains tax often say that such reforms would be too beneficial to the wealthy. As the tax debate heated up this summer, many opponents of reform repeated this claim.

How did the networks report on it? Did they put it into context by telling viewers the share of the tax burden currently shouldered by the wealthy? To find out, Media Research Center analysts reviewed all of the coverage of taxes in federal budget stories between June 1 and August 31 on ABCís World News Tonight, CBS Evening News, and NBC Nightly News. There were 36 federal tax stories on these shows. Eleven, almost one-third, included the Democratsí claim that the Republican proposal favored the wealthy.

"The president thinks [the GOPís] tax cuts are too generous to the wealthy," claimed ABCís John Cochran on the June 9 World News Tonight. NBCís David Bloom, on the June 16 Nightly News, added that "a preliminary analysis by Mr. Clintonís Treasury Department concludes that if you divide taxpayers into five groups, the top 20 percent, with family incomes over $93,000, get two-thirds of the tax cuts under the Republican plan." Paula Zahn, on the June 30 CBS Evening News, said President Clinton "disagrees with key parts of the tax cut bills passed by the House and Senate because they give too many breaks to the wealthy and not enough to middle-income Americans."

Beyond the fact that these reporters didnít allow Republicans to dispute Democratsí claims about their tax bill, none of the summerís tax stories put these claims in any context, failing to provide basic facts about who pays taxes and how tax rates affect the distribution of the tax burden.

"According to IRS data," writes Daniel J. Mitchell, an economist at the Heritage Foundation, "the top one percent of income earners pay nearly 29 percent of the income tax burden, the top 10 percent pay more than 59 percent, and the top 20 percent pay more than 74 percent. The bottom 50 percent of income earners, on the other hand, pay less than five percent of income taxes."

Mitchell also calls a myth the claim that lower tax rates necessarily mean the rich will pay less. "This outcome depends on how much tax rates are reduced," he argues.

"History indicates that the revenue-maximizing rate is less than 30 percent. In other words, when marginal rates are higher than 30 percent, the rich probably will pay more if rates are lowered. The reason: Because incentives to hide, shelter, and underreport income are reduced."

Mitchell points out that in the 1920s, the 1960s, and again in the 1980s, the wealthiest taxpayers shouldered more of the tax burden as their tax rates fell. For instance: "President John F. Kennedy slashed the top tax rate from 91 percent to 70 percent. In the ensuing three years, those making more than $50,000 annually saw their tax payments rise by 57 percent, and their share of the tax burden climbed from 11.6 percent to 15.1 percent."

In addition, Mitchell says, the Reagan years "saw the top rate fall from 70 percent in 1980 to 28 percent in 1988. What happened to the rich? The top one percent went from shouldering 17.6 percent of the income tax burden in 1981 to paying 27.5 percent of the total in 1988. The top 10 percent saw their share of the burden climb from 48 percent in 1981 to over 57 percent in 1988."

Despite the large amount of time devoted to the tax issue this summer, none of the network stories went into enough depth to provide basic information to viewers about the wealthy and taxes.


ó Rich Noyes


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