Republicans and Democrats were busy spinning the findings of a Congressional Budget Office report on the Bush administration’s tax cuts before the document was even released. Republicans are right that every segment of taxpayers got a break. Democrats are right that the wealthy fared much better under the new tax policies than the middle and lower class. Given these two facts – coupled with a ballooning deficit because of the tax cuts and dismal job growth in the past two months despite them – members of Congress will have to seriously consider if the country can afford to make many of the tax cuts permanent, as the Bush administration wants.

According to the CBO report released Friday, the effective income tax rate for everyone dropped from 11.1 percent in 2001, when the old law was still in effect, to 9 percent this year. However, the largest decrease went to the top 1 percent of tax filers based on income where the tax rate went from 24.4 percent in 2001 to 19.7 percent this year. Without changes in the tax law, the effective income tax rate for all filers would have remained fairly constant.

Instead, the bipartisan CBO found that two-thirds of the benefits from tax cuts since 2001 went to households in the top fifth of earnings. One-third of the benefits accrued to households in the top 1 percent of income, with an average of $1.2 million in yearly earnings.

The result is that those with the highest earnings paid a smaller percentage of total federal taxes while middle-income families contributed more. The top 1 percent of earners will pay 20.1 percent of total federal tax this year, down from 22.2 percent in 2001. Households earning between $51,500 and $75,600 saw their share increase from 18.7 percent to 19.5 percent.

At the same time, the average after-tax income for people in the top 1 percent of earners grew more than 10 percent, while that of those of the middle 20 percent grew 2 percent and those in the bottom fifth saw their earnings increase by less than 2 percent.

There are two reasons the wealthiest are faring better. One is that they get less of their money from paychecks and more from investments, such as stocks and bonds, than average Americans. Most families get 80 percent of their income from paychecks. The top 1 percent of Americans, in terms of wealth, get only half their income from salaries. The recent cuts reduced the tax rate on capital income, such as stock dividends, to 15 percent, much lower than the tax rate on wages when Social Security and Medicare are figured in. In addition, investment income has grown faster than wages.

The CBO analysis confirms what many had warned when the changes were proposed – that although everyone will benefit somewhat from the tax cuts, the rich benefit most. With the economic recovery lagging, members of Congress must now decide if this is a fair trade-off.