The point of disagreement betwen George W. Bush
and Al Gore
on the use of the surplus is complex and was, to be quite fair, distorted
by both candidates in the October 3 debate
's point about fuzzy math
boils down to this:
According to the current tax system, a single filer making, say $20,000, pays a 15% top marginal rate on his or her income, amounting to $3,000 (in reality, this person may pay substantially less, thanks to structures such as the Earned Income Tax Credit, but let's go with it for the purpose of the example). A single filer making $2 million pays federal income tax at a 39.6% rate for most of his income. This taxpayer pays a base tax of about $769,400 per year (according to 2000 marginal brackets obtained from IRS Form 1040-ES).
As you can see, the rich guy pays 256 times more in taxes than the poor (well, maybe middle-class) guy. This is the nature of the progressive tax system--that those who earn more give a larger percentage of their income to the government.
Bush wants to cut the 15% bracket to 10% and lower the top marginal bracket to 33%. The poor guy's taxes would come down $1,000 under this plan, and the rich guy would save about $112,699 (assuming the 33% bracket applies to all income above what is now the 39.6% level). In terms of the percentage of their income saved by these tax cuts, both of them see a cut of about 5% of their total annual income. So in percentage terms, they see similar benefits. But the rich guy's tax cut, in absolute terms, is 113 times large than the poor guy's.
Bush's premise is that all taxpayers should get a tax cut, not just targeted segments of the middle class. To his mind, this should be accomplished by lowering the tax brackets for all Americans so that no one sends more than one third of his or her income to the federal government. In this way, yes, wealthy Americans will receive a large amount of dollars in tax cuts, but many lower-income citizens will see their burden (in percentage terms) lowered even more. Bush's charge of fuzzy math revolves around this misconception.
The upshot of it all is that Al Gore's claim as stated in the debate is true, but it does not reflect the large benefit that lower-income taxpayers would receive.
Relative to mblase's charge that the Bush tax cut would go to the rich instead of the American people: CBO statistics show that households earning more than $120,000 pay 77% of all federal income taxes, despite representing only 20% of the population. Those 40% of households earning less than $20,100 per year actually receive 1% of income-tax receipts in the form of credits and refunds. The Bush plan cuts the taxes of these 40% even further while increasing the percentage of the total tax paid by wealthy households.