Media Mantra: Tax Cuts Favor the Wealthy

May 18th, 2006 10:47 AM

Networks fixate on tax cuts ‘for the rich’ while ignoring exploding tax revenues.

While Congress hammered out a $70 billion tax-relief bill last week, the media wasted no time spinning it. After the House approved its version on May 10, the “NBC Nightly News” cited “Democratic critics [who said] the overall bill is heavily tilted in favor of the very wealthy.” At roughly the same time, the “CBS Evening News” presented a graphic to its viewers showing “for incomes of $50,000 or less, you’ll average no more than $46 in savings.”

The following day, ABC’s “Good Morning America” team offered a $20 bill to shoppers at a New Jersey mall as a cynical demonstration of how little this tax cut would help some Americans.

All totaled, the broadcast networks did 16 reports on this issue in their three-day blitzkrieg, largely with the same predictable mantra: tax cuts favor the rich. Conspicuously absent was an honest assessment of just how much lower wage earners in America have benefited from the most recent income tax changes, as well as how much the government has benefited from higher tax revenues.


The Truth Hurts
Without question, the best thing government can do for low-income families is not burden them with income taxes. Toward that goal, according to a March 30 report by the Tax Foundation’s Scott Hodge, the percentage of Americans not paying any federal income taxes has exploded in the past few years as a result of recent tax changes: “What many critics have ignored is the number of people who were removed from the tax rolls as a result of the expansion of the child tax credit, which was a key provision of the President's Economic Growth and Tax Relief Reconciliation Act of 2001.”

The following chart depicts just how large an impact this has had, as the percentage of returns filed with zero federal income tax liability has gone from about 25 percent in 2001 to 32 percent today, now standing at its highest point in more than five decades.

                                   Source: Tax Foundation

The broadcast networks chose not to share these statistics with their viewers during their three-day “Tax Cuts are Destroying America” marathon. Instead, NBC’s Chip Reid on the May 10 “Nightly News” said “some Democrats say they opposed [the bill] because it adds about $70 billion to the deficit.” The following evening, ABC’s Elizabeth Vargas asked on “World News Tonight,” “In the meantime, what does this do to the deficit?” She conveniently answered her own question: “$70 billion less collected in taxes.”


Accentuating the Negatives
The media also failed to offer any proper perspective on the size of the tax relief bill. At $70 billion over five years, this averages out to $14 billion per year in a $2.7 trillion annual budget, or one half of one percent.

Yet, the media presented this as a dire scenario with ominous portent for the currently $8.2 trillion national debt.

The CBS “Evening News” on May 10 did an entire story on the ever-growing mountain of Treasury paper trading across the globe, with anchor Bob Schieffer introducing the segment by declaring “any tax cut is just going to drive the national debt higher.” Schieffer conveniently ignored that virtually any fiscal action taken by Congress has this effect, as there have only been six years since 1930 when the debt declined.

According to the Bureau of the Public Debt, the gross federal debt has not receded on a year-over-year basis since 1960, a fact that clearly was lost on CBS’s business correspondent Anthony Mason, who incorrectly informed his viewers during this same “Evening News” report that when Bill Clinton was president, “our debt actually began to shrink.”


Forgetting Their Own Words?
Another key part of this bill that the media largely downplayed was the extension of the Alternative Minimum Tax exemption through 2006, which made up $31 billion of the bill’s tax relief, or 44 percent. This will prevent an estimated 15 million middle class families from paying significantly more in taxes this year under rules created years ago for wealthy taxpayers.

Yet, all three networks understated the significance of this extension. The worst offender was CBS, which did eight reports in three days about the bill but devoted only one sentence to the Alternative Minimum Tax (AMT).

But CBS wasn’t always so uninterested in the AMT. On the February 23 “Early Show,” Julie Chen brought Kiplinger’s Vera Gibbons on to discuss the horrors of this tax. After Gibbons addressed some of the details, and how it can drastically impact middle-income families with children, Chen responded with shock, “Oh, my goodness.” As the segment concluded, Chen declared, “So it really sounds like they need to change the tax laws” and accurately stated, “It’s hitting the wrong people.”

Unfortunately, three months later as Congress was addressing this issue, all Chen had to say on May 10’s “Early Show” was: “House Republicans have agreed on a plan that is designed to keep 15 million families from paying the Alternative Minimum Tax this year. Democrats complain the bill favors the rich.” Chen must have forgotten how disgusted she was about the AMT in February.

A similar wave of amnesia hit NBC’s Chip Reid. On the April 15, 2005, “Nightly News,” Reid did an entire segment on the horrors of the AMT, which he stated was “intended to target the rich, but now it is hitting a lot of the middle class, and it's only going to get worse.” After interviewing a couple who had six children and had been hit hard by the tax, Reid explained: “due to inflation, the tax has gradually worked its way down the income scale and now threatens millions of middle-class families. And since AMT taxpayers are barred from using the child tax deduction, the larger the family, the bigger the penalty.”

As the segment came to a conclusion, Reid expressed an urgency for Congress to change this tax law: “By the year 2010, more than 60 percent of people in the 50- to $100,000 income range will be slammed by the AMT.”

Mysteriously, a little more than one year later when Congress acted to extend a provision saving people from this tax, Reid shared only two sentences with his viewers during the May 10 “Nightly News” on the subject, and then quickly moved into the typical mantra: “But Democratic critics say the overall bill is heavily tilted in favor of the very wealthy.”


Ignoring the Positives
The broadcast networks also appeared to be suffering from collective amnesia about how the economy was doing before the last tax cuts were implemented and what has happened since. Unemployment during this cycle peaked in June 2003 at 6.3 percent right as the 2003 tax cuts were about to go into effect; it is now 4.7 percent. According to the Bureau of Labor Statistics’ Household Survey, there have been approximately 6 million new jobs created since then, and the average weekly wage for production workers has increased by 10.2 percent.

Meanwhile, the average net worth of Americans has literally exploded to its highest point in history – higher than the stock bubble years of the late ’90s. This of course has been sparked by a housing boom that has seen an explosion in homeownership to its highest level ever.

And, it should be no shock that the stock market reached its post-bubble low point very close to when these last tax cuts were being negotiated. The S&P 500 was around 900 in May 2003; today, it rests at about 1300, a roughly 43-percent increase that impacts almost every American who has an IRA or a 401(k).

But, the media didn’t address the positives of tax cuts during this three-day assault. They also didn’t address another truth: tax receipts have dramatically risen since the last tax cuts were implemented. After all, it would be difficult to make the case that tax cuts cause budget deficits if you were reporting that income tax receipts typically increase after such fiscal stimuli.

Yet, regardless of the media’s refusal to report it, this is exactly what happened. In fiscal 2003, the federal government collected $1.782 trillion in income taxes. In fiscal 2006, the Office of Management and Budget estimates such receipts will rise to $2.285 trillion, a 28-percent increase since the last tax cuts were enacted. This also represents an all-time high in revenues.

Finally, the media also chose to ignore a May 10 announcement from the Treasury department that April generated a surprisingly high number of federal income tax receipts, the second-highest one-month tally in history. Though all three networks’ evening news broadcasts addressed supposedly negative ramifications of this $70-billion tax relief bill on the deficit, not one of them felt it was important to share the news released earlier that morning about historically high tax collections.

Business & Media Institute