WSJ ignored disproportionate benefits for wealthy in GOP tax package

Summary: Wall Street Journal articles on the $70 billion GOP tax bill ignored entirely the disproportionate benefit to the wealthy of the GOP package.

In a May 10 article on the $70 billion tax bill agreed to by Republican members of Congress and passed by the House, Wall Street Journal staff writer Brody Mullins ignored entirely what critics note is the disproportionate benefit to the wealthy of the GOP package.

On May 9, Republican negotiators from the House and Senate finalized a tax package that would extend by two years President Bush's reduced tax rate for dividends and capital-gains income. The bill would also block the growth of the alternative minimum tax, which an increasing number of Americans have had to pay in recent years. The House passed the bill 244-185 the following day, with two Republicans crossing party lines to vote against the bill and 15 Democrats voting for it.

Critics of the bill have pointed to a recent estimate released by the Tax Policy Center showing that the dividend and capital-gains tax cut would significantly reduce taxes for those with annual incomes over $1 million, while offering meager savings to middle-class Americans. From a May 5 New York Times article:

The tax cut bill that Senate and House leaders have generally agreed upon is expected to save Americans at the center of the income distribution an average of $20 each, according to estimates by the Tax Policy Center, a nonprofit research organization in Washington.

The top tenth of 1 percent, whose average income is $5.3 million, would save an average of $82,415. Those in the top group would see their tax bill cut 4.8 percent, while Americans at the center of the income distribution -- the middle fifth of taxpayers, who will earn an average of $36,000 this year -- could expect a 0.4 percent reduction in their tax bill, or about $20.

Those who make less than $75,000 -- which includes about 75 percent of all taxpayers -- would save, at most, $110 each. Those making more than $1 million would save, on average, almost $42,000.

In his May 10 Journal article (subscription required), Mullins repeated Republicans' claim that the reduced tax rates on investment have propelled the economy in recent years:

The centerpiece of the legislation, which was a year in the making, would extend the 15% tax rates on capital gains and dividends from the end of 2008 through 2010. Republicans say the lower rates, first enacted in 2003, are a key engine of investment and economic growth.

But Mullins omitted estimates of the bill's disproportionate benefits to the richest Americans. Moreover, while he noted Republicans' argument in support of the tax cuts for investors, he failed to report any criticism of the bill.

By contrast, the May 10 article by Washington Post staff writers Jonathan Weisman and Paul Blustein noted the Tax Policy Center's estimate and bipartisan criticism of the bill:

But the package remains controversial, with GOP leaders saying it is essential to sustain a strong economic recovery and Democrats and a few Republicans saying the cuts would mainly benefit the wealthy and add to the long-term deficit.

[...]

Critics maintain that those tax cuts have overwhelmingly benefited the wealthy, while budget cuts target programs for the poor to close a deficit created largely by tax cuts totaling nearly $2 trillion since Bush took office.

Middle-income households would receive an average tax cut of $20 from the agreement, according to the joint Urban Institute-Brookings Institution Tax Policy Center, while 0.02 percent of households with incomes over $1 million would receive average tax cuts of $42,000.

Similarly, a May 10 article by New York Times reporter Edmund L. Andrews reported on concerns surrounding the uneven distribution of the tax cuts:

Opponents of the tax cut for investors, which reduced the rate on dividends and capital gains to 15 percent, said the new tax bill would overwhelmingly benefit the very wealthiest taxpayers.

The Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute, recently estimated that the top 10 percent of income-earners would get 81.8 percent of the benefit from lower taxes on investment profits and 73 percent of the benefit from freezing the alternative minimum tax.

As Media Matters for America noted, Mullins contributed to a September 29, 2005, article that substantially underestimated the cost of the dividend and capital-gains tax cuts; furthermore, the article contradicted prior reporting by Mullins.

—J.K.