Capitol Hill

Politics is not unlike theater. Theater has actors; Washington has politicians. Theater has storylines; politics has messages. Theatrical productions have characters; politics has its fair share of characters to be sure. Actors use props; politicians use data.

During one recent Democratic production, the expected props failed to arrive. But the actors were determined the show go on. They took their spots and improvised, sticking largely to the preconceived storyline.

The drama begins

Fiction is well and good in the theatrical realm, but in the world of politics, facts often prove unwelcome and contentious visitors. The findings of a recent Congressional Budget Office (CBO) study are a case in point.

On Aug. 13, the nonpartisan CBO released a paper titled "Effective Federal Tax Rates Under Current Law, 2001 to 2014," which examines how federal tax rates have changed since enactment of the Bush tax cuts in 2001, 2002 and 2003 and how those rates should change during the coming decade as the provisions phase in, phase out and "sunset" as scheduled.

When senior congressional Democrats earlier this year requested CBO to conduct the analysis, they expected to have a script proclaiming the "injustice" of the Bush tax cuts and statistical rationale for presidential nominee John Kerry's plan to roll back tax cuts for wealthier Americans. But the paper came back showing all taxpayers received tax relief and the Bush tax cuts actually had been "progressive," meaning the overall federal tax burden shifted away from the middle and lower-income earners toward the wealthy. The Democrats were left in a quandary.

Needing to improvise, they focused on a small section of the report, declaring the study confirms their complaints that the tax-relief packages heavily favored wealthy taxpayers. Democrats focused on a finding that demonstrates though all income classes have seen their income-tax rates lowered by the Bush tax cuts, the wealthiest 1 percent of taxpayers have received the largest percentage point reduction in their effective income-tax rate—4.8 percent—and the top 20 percent of taxpayers saw their taxes cut by an average of 3 percent. The other 80 percent have seen their tax bill cut by 1.4 percentage points to 1.8 percentage points.

When the report came out on a Friday morning, the Republicans were caught flat-footed—they didn't have a press statement ready for the Friday news cycle. And after a spate of early unfavorable press for their prized and hard-won tax packages, they felt compelled after the weekend break to offer a different record. The Republican line was that the Bush tax cuts actually reduced the overall tax burden for the middle class.

The plot unfolds

So who's right? It's certainly true, as Democrats charge, that the wealthiest 20 percent of taxpayers saw a larger percentage point reduction in their taxes. But this demographic pays an overwhelming majority of all federal income taxes—78.4 percent of all federal receipts before the Bush tax cuts were enacted.

It's also true, as Republicans predicted, that the Bush tax cuts made the tax code more progressive. The top 20 percent of taxpayers now shoulders 82.1 percent of the overall federal income tax burden. By contrast, the middle-class share of income taxes dropped from 6.4 percent to 5.4 percent after the Bush tax cuts. Even more interesting, the tax cuts took about 2 million low-income earners off the tax rolls completely.

The discrepancy is that Democrats are focusing on the size of the tax cuts for each group, and Republicans are looking at the tax burden borne by each segment of the population.

The interpretation

Another element of theater is interpretation, and if it's any measure of theater, the dispute about the CBO study was good theater indeed.

Data is black and white, but thanks to our characters, there was ample interpretation to turn these numbers gray long enough to keep the story interesting.

R. Craig Silvertooth is NRCA's director of federal affairs.