Month: March 2006

March 22, 2006 12:58 PM | Permalink |

On January 1, 2006, temporary higher exemptions from the individual Alternative Minimum Tax were allowed to expire. These higher AMT exemptions were enacted to keep the Bush reductions in the regular income tax rates from pushing large numbers of people into the AMT. But continuation of these higher AMT exemptions is very costly, and our political leaders are adamantly unwilling to find a way to cover that cost (other than with more debt).

If Congress and the Bush Administration do not act to extend the temporary AMT tax breaks, the number of American taxpayers paying the AMT will jump by over 15 million in 2006. This analysis projects the number of 2006 AMT taxpayers in each state under current law (that is, with the same lower exemptions that were in force before 2003) and under the current House and Senate plans to extend AMT relief.

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March 16, 2006 05:29 PM | Permalink |

In 2003, Congress enacted—and President Bush signed into law—a new tax break that lowered the top federal income tax rate on capital gains from 20 percent to 15 percent. This special lower capital gains rate, which is less than half of the 35 percent top tax rate on salaries and wages, is not scheduled to expire until the beginning of 2009—but tax writers in Congress are already pushing to extend this tax break. This analysis provides a quick reminder that the lion’s share of the benefits from this tax break go to a very small group of the wealthiest Americans:

• In 2005, the wealthiest 1 percent of Americans received almost 70 percent of all long-term capital gains—and paid 72 percent of the tax on these capital gains.
• The wealthiest 10 percent of taxpayers enjoyed 90 percent of the capital gains eligible for this special tax break.
• The poorest sixty percent of Americans, by contrast, collectively received just 2 percent of the capital gains eligible for the lower capital gains rates.

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March 14, 2006 03:52 PM | Permalink |

The Bush Treasury Department today published charts that seem to show that President Bush’s huge tax cuts enacted in 2001 and 2002 failed to help the economy.

The tendentious report, “Report of the Department of the Treasury on the Economic Effects of Cutting Dividend and Capital Gains Taxes in 2003,” asserts that the 2003 tax cuts were the key to an improved economy in recent years. To prove that highly debatable point, the report presents charts showing how poorly the economy performed during President Bush’s first 2½ years in office, compared to more recently.

“Previously, the President had touted his 2001 and 2002 tax cuts as economically useful, but he now seems to have abandoned that claim,” noted Robert S. McIntyre, director of Citizens for Tax Justice. “Presumably, there will be further revisions in the President’s arguments as economic events unfold in the future.”

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