The $350 billion tax-cut package recently passed by Congress and signed into law by President Bush is going to exacerbate the state budget crises, do little to help working families and even less to stimulate the economy, according to government watchdog groups.

Under the Jobs and Growth Tax Reconciliation Act of 2003, tax filers who make more than $1 million a year will receive an average tax cut of $93,500 in 2003 compared to an average tax cut of $217 for middle-income filers—and even less for lower-income households, according to the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution.

To put income levels in perspective, the median household income in 2001 was $42,228, according to the U.S. Census Bureau’s most recent data. The median is calculated by dividing the income distribution into two equal groups, half having income above that amount and half having income below that amount.

“Because the [law] is so skewed to high-income filers, it is likely to prove inefficient in boosting the economy in the near term,” the Center on Budget and Policy Priorities (CBPP) reports. “Only when tax cuts are spent do they boost the economy in the near term.”

The new law is bad news for deficit-ridden states that have been slashing budgets, tapping rainy day funds and tobacco settlements for cash, and raising less conspicuous taxes and fees on such things as cigarettes and vehicle registration, all in an effort to balance their budgets. The federal tax cut will trickle down to states through two streams: less federal funding for services and lower state income tax receipts.

Nearly one-quarter of every dollar states spend to provide services comes from federal sources; and the new law will contribute to declines in state income tax collections because most states base their income tax policy on the federal system.

As a result of the tax cuts enacted since President Bush took office, “federal revenues will drop to their lowest level as a percentage of the economy since 1959,” CBPP reports. “Individual and corporate income tax collections this year will be at their lowest level, as a share of the economy, since 1943.”

Citizens for Tax Justice (CTJ) reports that by the end of this decade “taxes on the best-off 1 percent of Americans will fall by 17 percent,” as a result of the 2001, 2002 and 2003 tax cuts. “For the remaining 99 percent of taxpayers, the average tax reduction will be 5 percent,” CTJ says. “The top 1 percent is the only income group with a substantial reduction in its share of the total federal tax burden,” which will fall from 23.7 percent to 21.3 percent in 2010.

“Congressional Republicans and President Bush have made it clear who they really care about, and it’s not the average taxpayers,” says Robert S. McIntyre, director of CTJ. The “extravagant tax cuts for the very rich will come at the expense of everyone else and our children, who’ll have to pay back, with interest, the hundreds of billions of dollars that the government will borrow because of this irresponsible and unfair bill.”

Both CBPP and CTJ note in their analyses that the tax cuts could have a much larger price tag if Congress extends the cuts beyond their expiration dates. All but one provision of the 2003 law expires between the end of 2004 and the end of 2008. CBPP estimates the cost of the 2003 tax cuts would reach $807 billion to $1 trillion if provisions are extended through 2013.

For more information, visit: CBPP’s Web site at www.cbpp.org;  CTJ’s Web
site at www.ctj.org; and www.taxpolicycenter.org.