The Bush tax relief that played such an integral role in our emergence from the last recession and in our admirable growth for over six years will expire at the end of 2010. That event, if allowed to occur, will represent the largest tax increase in American history — as much as $2 trillion over 10 years by some estimates. This compares with the Clinton tax increase that was scored at $240 billion over five years. 

But first, any honest discussion on taxes must begin with an honest examination of who pays. For 2005, the most recent year for which information is available, IRS data indicate that taxpayers with an adjusted gross income in the top 25 percent of the population bore 86 percent of the federal income tax burden. If you expand it to the top 50 percent, the number jumps to 97 percent. In other words, the bottom half of the country pays a paltry 3 percent of the country’s taxes. This proves, in part, the steep progressivity of the income tax system. 

 But what about the Bush tax cuts? They only favor the wealthy, right? Again, let’s go to the facts. Since 2000, when President Bush entered office, the share of federal tax liabilities borne by the lowest and middle quintiles has decreased, while the share borne by the highest quintile has increased. In 2000, the lowest quintile bore 1.1 percent of total federal tax liabilities compared with 0.9 percent in 2004, the year that all of the Bush tax cuts were in effect. Thus, the federal tax liability of the lowest quintile dropped 18 percent. However, the highest quintile paid 67.2 percent of these liabilities in 2004, an increase of 1 percent in their liability since 2000, when they paid 66.6 percent. Far from favoring the wealthy, these numbers suggest that the wealthy are bearing more of the tax burden 

The Department of the Treasury recently released a paper studying the impact of letting tax relief expire: “A four-person, one-earner family with wage income each year of $40,000 in 2007 dollars would see a tax increase of $2,345; a four-person, one-earner family with wage income each year of $80,000 in 2007 dollars would see a tax increase of $2,000; a three-person, one-earner family with wage income each year of $40,000 in 2007 dollars would see a tax increase of $1,655; and a head of household with two children and wage income each year of $30,000 in 2007 dollars would see a tax increase of $1,615.” 

More than 116 million Americans would see their taxes go up. And small businesses that pay their taxes based on individual rates (which is most of them) could see their effective rate rise to more than 44 percent.