Tag: Archive

June 1, 2001 05:42 PM | Permalink |

Click here to see this analysis in PDF format.
Click here to see examples of how the rebate works.

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Some 39 percent of American taxpayers will not get the full amount of the highly-touted “rebate checks” that will be mailed this summer as a result of the President’s just-passed tax bill. That translates into 51 million taxpayers who will not get the full amount of the promised rebate checks. According to a new analysis by Citizens for Tax Justice:

• Thirty-four million taxpayers–26 percent– will get no rebate check at all
• Another 17 million taxpayers–13 percent–will get only partial rebates, averaging about half the advertised amounts of $600 for couples, $500 for single parents and $300 for other taxpayers.

The Check is Not in the Mail: Taxpayers with no rebate or only partial rebate this year from the 2001 tax bill
	All Taxpayers
Income Group (all taxpayers)	% with no rebate	% with partial rebate	Total % less than full	Average all taxpayers	# with less than full (000)
Lowest 20%	75%	22%	97%	$ 42	25,175
Second 20%	37%	22%	59%	179	15,324
Middle 20%	13%	17%	30%	335	7,724
Fourth 20%	2%	4%	6%	482	1,681
Next 15%	1%	—	1%	551	190
Next 4%	1%	—	1%	560	52
Top 1%	1%	—	1%	555	13
ALL	26%	13%	39%	$ 315	51,082
ADDENDUM
Bottom 60%	42%	20%	62%	$ 185	48,224
Top 10%	1%	—	1%	559	130

The taxpayers who get no or reduced benefits from the tax bill are concentrated in the bottom three-fifths of income earners. Sixty-two percent of the three-fifths of all taxpayers who make less than $44,000 a year will get less than the full rebate amounts, with 42 percent of these taxpayers getting nothing at all.

The tax rebates are supposed to reflect the tax savings from the new 10 percent income-tax bracket on the first $12,000 in taxable income for couples, $10,000 for single parents, and $6,000 for others. Payroll taxes, which are the largest federal tax for three out of four taxpayers, are not counted in computing the rebates.

Oddly, although most taxpayers in the bottom 60 percent of the income scale will get reduced or zero rebates, the tax bill extends the benefits of the rebate to about two million upper-income taxpayers who will not actually benefit from the new 10 percent rate bracket, due to the Alternative Minimum Tax.

“Like the rest of the Bush tax plan, the rebates have been carefully designed to give as little as possible to those who need the money, and as much as possible to those who don’t,” said Robert S. McIntyre, director of Citizens for Tax Justice.

On a state-by-state basis, the percentage of taxpayers with no or reduced rebates exceeds 50 percent in Mississippi (52%) and West Virginia (50.5%). Other states among the ten with the highest percentages of taxpayers with no or reduced rebates include: Louisiana (49%), Montana (49%), Arkansas (48%), Oklahoma (48%), Alabama (47%), Kentucky (45%), New Mexico (45%) and North Dakota (44%)

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May 26, 2001 05:44 PM | Permalink |

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The tax plan approved by Congress on May 26, 2001 preserves the high-income tax cuts proposed by George W. Bush, but adds enough new tax breaks to make the final bill 20 percent more costly that the original Bush plan.

A distributional analysis released by Citizens for Tax Justice shows that when the tax plan is fully phased in:

• The typical tax cut for the median income taxpayer will be $600 a year.
• For the 78 million taxpayers in the lowest 60 percent of the income scale, the tax cut will average $347 a year.
• In contrast, at the top of the income scale the average tax cut will be $53,000 annually–virtually identical to the $54,000 annual tax cut proposed by the President.

“Congress has given the President what he truly cared about–gigantic tax cuts for the rich,” said Robert S. McIntyre, director of Citizens for Tax Justice. “But Congress reneged on its promise to honor fiscal responsibility. Instead of a tax cut one-quarter less in size than the President’s plan, Congress actually increased the fully-phased-in cost of the tax cuts by a fifth.”

“As a result, over the upcoming years, average taxpayers will pay dearly for this tax cut plan in reduced public services, a return to budget deficits or, most likely, both.”

To hide the true cost of the tax plan, Congress relied on slow phase-ins, artificial phase-outs and a redefinition of the ten-year budget period to include only nine years. “This is reminiscent of Bush’s campaign strategy of insisting that there are only nine years in a decade,” noted McIntyre. “Only if Bush’s education plan is a total failure are he and Congress likely to get away with this snake-oil approach to budget policy.”

Two tables and a graph showing the distributional effects of the tax plan and its predecessors follow. The analysis was performed using the Institute on Taxation and Economic Policy Tax Model.

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May 21, 2001 02:33 PM | Permalink |

Up four flights of dark stairs in a dilapidated building on L Street, Robert S. McIntyre sits behind his computer in chinos and an unironed shirt and turns out detailed analyses of who the winners and losers will be in the tax legislation working its way through Congress and expected to become law this week.

Mr. McIntyre is one block north, a few blocks east and light-years away in most other respects from the lawyers and accountants in fancy offices on K Street who wear tailor-made suits with deep pockets while they try to help their clients by twisting and turning tax bills.

Read the Full Article

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May 16, 2001 11:35 AM | Permalink |

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May 2, 2001 11:36 AM | Permalink |

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President Bush’s proposed reductions in federal taxes are now under consideration in Congress. They include sharp cuts in personal income tax rates, new income tax breaks, and complete repeal of the federal estate tax. Although the tax cuts have been slightly scaled back in size by the congressional budget resolution, they still are expected to cost the federal government some $1.7 trillion over the next decade (including higher interest payments).

State and local governments, which rely on federal payments and programs for significant shares of their revenues, could find those funds endangered should the Bush tax cuts be enacted. The President’s budget outline, for example, projects that to pay for the cost of the tax cuts, federal appropriations will fall by a sixth as a share of the gross domestic product over the next decade. Domestic appropriations could be cut even more given the President’s apparent desire to increase defense outlays.

Lost federal funding may be the largest problem facing the states under the Bush tax program. But there is another, very important issue: the effects of the Bush tax cuts on state tax collections.

States stand to lose upwards of $35 billion dollars a year in revenues by 2012 if the Bush tax plan is adopted. The Bush program threatens to undermine funding for important public services and/or shift the burden of state taxation even further onto middle- and lower-income families–because virtually all of the endangered state revenues involve estate taxes and income taxes currently paid by the states’ wealthiest taxpayers.

1. Estate Tax Repeal & the States–Up to $18.5 Billion a Year in Direct Costs

Every state shares in a portion of the federal estate tax, through a mechanism commonly called the “pickup tax.” This is essentially a revenue-sharing tool by which the federal government gives each state about 26 cents for each dollar in net federal estate tax paid by a state’s

States Potentially Losing the Largest Dollar Amounts from Repeal of the Federal Estate Tax State-by-State Estimates for the year 2012, $-millions
	State “Pickup” Tax Lost	Endangered Other Inheritance Tax	Total Lost or Endangered	% of Natl Loss
California	$ 2,661	$ —	$ 2,661	14.4%
Florida	1,860	—	1,860	10.0%
Pennsylvania	521	1,260	1,781	9.6%
New York	1,530	—	1,530	8.3%
New Jersey	495	655	1,150	6.2%
Texas	832	—	832	4.5%
Ohio	522	211	733	4.0%
Illinois	714	—	714	3.9%
Connecticut	306	374	680	3.7%
North Carolina	283	307	590	3.2%
Totals, 10 states:	$ 9,724	$ 2,808	$ 12,533	67.7%

residents.

In addition, 12 states impose supplemental estate or inheritance taxes.

Under the Bush tax plan, the revenue-sharing accomplished through “pickup taxes” would be repealed. In addition, states that impose supplemental estate or inheritance taxes would probably face heavy pressure to repeal them.

When the Bush estate tax repeal is fully in place in 2012 (as the House proposes), the loss of the pickup tax alone would cost state governments a total of $15.2 billion. If state supplemental estate and inheritance taxes are lost as well, the annual direct revenue loss to the states would grow to $18.5 billion.

In terms of dollars, the largest revenue losses would (or could) be experienced by:

• California: $2.7 billion in 2010 (pickup tax only).
• Florida: $1.9 billion (pickup only).
• Pennsylvania: $1.8 billion, including $521 million from the lost pickup tax and potentially $1,260 million in endangered supplemental inheritance tax.
• New York: $1.5 billion (pickup only)
• New Jersey: $1.2 billion, including $495 million from the lost pickup tax and potentially $655 million in endangered supplemental inheritance tax.
• Texas: $832 million (pickup only)
• Ohio: $733 million, including $522 million from the lost pickup tax and potentially $211 million in endangered supplemental inheritance tax.
• Illinois: $714 million (pickup only)

States Potentially Losing the Largest Shares of Total Tax Revenues from Repeal of the Federal Estate Tax State-by-State Estimates for the year 2012, $-millions
Shares of total state tax revenues in danger	“Pickup” Tax	Endangered Other Inheritance Tax	Total Lost or Endangered	$-mill.
New Hampshire	1.9%	2.6%	4.5%	$ 146
Pennsylvania	0.8%	2.0%	2.9%	1,781
Connecticut	1.2%	1.5%	2.7%	680
New York	2.7%	—	2.7%	1,530
Florida	2.6%	—	2.6%	1,860
New Jersey	0.9%	1.2%	2.2%	1,150
Vermont	2.0%	—	2.0%	62
Delaware	1.6%	—	1.6%	43
Oklahoma	0.8%	0.7%	1.4%	296
Massachusetts	1.4%	—	1.4%	350
Ohio	1.0%	0.4%	1.4%	733
Indiana	0.6%	0.6%	1.3%	389
Nevada	1.3%	—	1.3%	110
California	1.2%	—	1.2%	2,661
Illinois	1.2%	—	1.2%	714
North Carolina	0.6%	0.6%	1.2%	590
District of Columbia	1.1%	—	1.1%	90
Tennessee	0.9%	0.2%	1.1%	236
Missouri	1.1%	—	1.1%	297
Virginia	1.1%	—	1.1%	349
Iowa	0.8%	0.2%	1.0%	142
Kansas	1.0%	—	1.0%	111
Arizona	1.0%	—	1.0%	232
Maryland	0.9%	0.1%	1.0%	310
Louisiana	1.0%	—	1.0%	199
Maine	1.0%	—	1.0%	61

• Connecticut: $680 million, including $306 million from the lost pickup tax and potentially $374 million in endangered supplemental inheritance tax.
• North Carolina: $590 million, including $283 million from the lost pickup tax and potentially $307 million in endangered supplemental inheritance tax.

Just the five biggest potential losers, California, Florida, Pennsylvania, New York and New Jersey, represent almost half of the total potential revenue loss nationwide.

As shares of total state tax revenues, the biggest direct losses from estate tax repeal would (or could) be experienced by:

• New Hampshire: 4.5 percent of total state tax revenue, including 1.9 percent from the lost pickup tax and 2.6 percent in endangered supplemental inheritance tax. (New Hampshire Governor Jeanne Shaheen has recently proposed to repeal the state’s supplemental inheritance tax.)
• Pennsylvania: 2.9 percent of total state tax revenue, including 0.8 percent from the lost pickup tax and 2.0 percent in endangered supplemental inheritance tax.
• Connecticut: 2.7 percent of total state tax revenue, including 1.2 percent from the lost pickup tax and 1.5 percent in endangered supplemental inheritance tax.
• New York: 2.7 percent of total state tax revenue (pickup only).
• Florida: 2.6 percent of total state tax revenue (pickup only).
• New Jersey: 2.2 percent of total state tax revenue, including 0.9 percent from the lost pickup tax and 1.2 percent in endangered supplemental inheritance tax.
• Vermont: 2.0 percent of total state tax revenue (pickup only).
• Delaware: 1.6 percent of total state tax revenue (pickup only).
• Oklahoma: 1.4 percent of total state tax revenue, including 0.8 percent from the lost pickup tax and 0.7 percent in endangered supplemental inheritance tax.
• Massachusetts: 1.4 percent of total state tax revenue (pickup only).
• Ohio: 1.4 percent of total state tax revenue, including 1.0 percent from the lost pickup tax and 0.4 percent in endangered supplemental inheritance tax.

A table showing the direct effects on all of the states of estate tax repeal is at the end of this paper as an appendix. As the next section of this paper details, however, these direct effects far understate the total impact of estate tax elimination on the states.

2. State Income Tax Losses from Estate Tax Repeal–Another $16.5 Billion a Year

A second effect of Bush’s proposed repeal of the federal estate and gift tax is the major negative impact it would have on income tax revenues, both federal and state. When the gift tax was first attached to the estate tax back in 1932, its purpose was not only to curb estate tax avoidance, but also to protect the integrity of the income tax. Without the gift tax, many wealthy people could find ways to make temporary, untaxed transfers of their assets to low- or no-tax entities, and then, after interest, dividends, capital gains and so forth have been realized, recover the proceeds.(1)

Recently, the congressional Joint Committee on Taxation took note of this huge problem and sharply revised its previous estimates of the cost of estate tax elimination. Repeal of the estate and gift tax is now expected to cost the federal government 82 percent more than the tax currently raises! By fiscal 2011, for example, repeal would cost $96.9 billion a year, compared to anticipated federal estate and gift tax revenues without repeal of $53.4 billion that year. The $43.5 billion added annual cost would stem from widespread income tax avoidance.(2)

The Joint Tax figures imply that the best-off one percent of taxpayers would take advantage of estate and gift tax repeal to avoid about a fifth of the federal income taxes they now pay on their capital gains, interest and dividends–an estimate that may well be conservative once creative lawyers and accountants get to work. State income taxes would be endangered by estate tax repeal, too, perhaps to an even greater degree than federal taxes, because of the ease of moving investment assets from state to state.

As a result, the cost to the states from elimination of the estate tax could easily reach $35 billion a year in combined estate tax and income tax losses once repeal is fully effective.

 

Federal & State Revenue Losses from Repeal of the Federal Estate & Gift Tax (Based on House-passed plan, not fully effective until fiscal 2012)
fiscal yrs, $-billions	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	Source
FEDERAL:											JCT except 2012
Current federal estate & gift taxes	$ 34.9	$ 36.0	$ 36.4	$ 37.3	$ 39.8	$ 43.7	$ 46.4	$ 49.3	$ 53.4	$ 57.8
Immediate repeal	–54.5	–58.4	–61.1	–64.4	–69.7	–76.4	–82.8	–88.8	–96.9	–104.7
House phased-in estate tax repeal	–7.0	–9.1	–11.3	–13.1	–14.9	–19.8	–27.4	–33.7	–49.2	–104.7	JCT 03-11
Loss of estate tax	–5.7	–7.2	–8.5	–9.7	–10.9	–13.3	–17.4	–20.9	–28.2	–57.8	CTJ, based on JCT
Income tax losses	–1.3	–1.9	–2.8	–3.4	–4.0	–6.5	–10.0	–12.8	–21.0	–46.9
% of cost
Estate & gift taxes	81%	79%	75%	74%	73%	67%	63%	62%	57%	55%
Income taxes	19%	21%	25%	26%	27%	33%	37%	38%	43%	45%
Income tax losses add to direct loss	+23%	+26%	+33%	+35%	+37%	+49%	+58%	+61%	+74%	+81%
STATE
State estate taxes now	$ 11.2	$ 11.5	$ 11.7	$ 12.0	$ 12.8	$ 14.0	$ 14.9	$ 15.8	$ 17.1	$ 18.5	IRS/CTJ
State losses
Lost estate taxes	–1.8	–2.3	–2.7	–3.1	–3.5	–4.3	–5.6	–6.7	–9.0	–18.5	CTJ
Lost income taxes	–0.5	–0.7	–1.0	–1.2	–1.4	–2.3	–3.5	–4.5	–7.4	–16.5	CTJ
Total state losses	$ –2.3	$ –3.0	$ –3.7	$ –4.3	$ –4.9	$ –6.6	$ –9.1	$ –11.2	$ –16.5	$ –35.1	CTJ
Sources: Joint Committee on Taxation (JCT); Internal Revenue Service (IRS); Citizens for Tax Justice (CTJ) for 2012 and as noted.

3. Loss of Federal Tax Deductions for State and Local Taxes

In a third strike against state revenues, the Bush tax plan would indirectly make sharp reductions in federal itemized deductions for state and local taxes. Obviously, the lower marginal income tax rates proposed by President Bush would reduce the value of all federal income tax deductions somewhat. But the effects of the Bush plan on itemized deductions for state and local taxes are especially significant, potentially reducing the value of these deductions by more than 50 percent nationwide, and by even larger amounts in higher-income states.

Under the Bush tax plan, taxpayers in the top fifth of the income scale, except the top one percent, would see their apparent tax cuts sharply reduced because the President’s tax cut plan would push millions of these taxpayers into the Alternative Minimum Tax. The “AMT,” as the name implies, is an alternative income tax that taxpayers must pay if it exceeds their regular income tax. The AMT was originally intended to curb upper-income tax sheltering, but because its brackets have not been adjusted for inflation, it threatens to affect many taxpayers without shelters over the upcoming decade.(3)

According to the Joint Committee on Taxation, by 2006, Bush’s tax cuts would double the number of taxpayers affected by the AMT, from fewer than 9 million to almost 19 million. That occurs because the Bush plan reduces the 28 percent and 31 percent regular income tax rates to 25 percent, but keeps the tax rates for the AMT at 26-28 percent.(4) (For the best-off one percent, the AMT effects are not very significant, because their top regular income tax rate will be 33 percent, down from 39.6 percent.)

Once in the AMT, taxpayers can no longer claim deductions for state and local taxes.

• Nationally, we calculate that for taxpayers in the top fifth of the income scale, excluding the best-off one percent, the Bush plan has the effect of denying them 78 percent of the state and local tax deductions they could otherwise take.

• Because most itemizers are in the top fifth of the population, the Bush plan’s AMT effect has the effect of cutting the total tax benefits from state and local tax deductions in half.

Such a large reduction in the federal tax benefits from state and local tax deductions could have a serious impact on the ability of states and localities to impose income and property taxes, since the effective burden of these taxes on the better-off would rise sharply under the Bush plan. The deductibility of state and local income and property taxes on federal itemizers’ tax returns means that for every dollar in income or property taxes paid to a state or local government, federal taxpayers who itemize get a federal tax reduction of as much as 39.6 cents (depending on what federal tax bracket they are in). The reduced federal income tax rates under the Bush plan, and the resulting AMT hike, would reduce the percentage of state income and property taxes that would be “exported” to the federal government in the form of reduced federal income taxes.

Reducing the ability of states to export their income and property tax burdens to the federal government in this way would make these taxes a less attractive option for state policy makers–and could encourage states to rely more on regressive sales and excise taxes (which are not deductible for federal itemizers) as a source of funding. That would not be good news for the majority of state taxpayers.

Conclusion

Beyond its major effects on the federal budget, the Bush tax program threatens to reduce state revenues by upwards of $35 billion a year once it is fully in place–and to make state tax systems even more regressive than they already are. These serious impacts on the states have not received the attention they deserve, but they should worry anyone who cares about the adequacy of state and local public services and the fairness of how they are funded.

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April 25, 2001 11:37 AM | Permalink |

Click here to see this analysis in PDF format.

An April 24, 2001 press release from the Bush Treasury Department confirms previous estimates by Citizens for Tax Justice about the aggregate effects of the Bush tax proposals on various demographic groups. But the Bush release fails to tell average taxpayers what the Bush plan will actually mean for them.

Treasury offers summary statistics about the fully-phased-in size of the Bush income tax cuts and the number of taxpayers who would receive tax reductions–for all taxpayers and selected subgroups, including families with children, single parents, and seniors. Treasury’s findings are similar to figures released by CTJ earlier this year.

Unlike CTJ’s estimates, however, Treasury does not provide information about the large number of taxpayers who would receive no benefit from the Bush tax proposals. Treasury also fails to provide information on the median, or typical, tax cuts under the Bush plan for taxpayers in the various demographic groups.

• For example, while Treasury says that 13 million seniors would get an average income tax cut of $892 each under the Bush plan, it fails to note that almost half of all seniors would get nothing, and that the typical senior would get a tax cut of only $150.
• Likewise, Treasury says that 8 million “single moms” would get a tax cut of $712, but does not disclose that 48 percent of single parents would get nothing, and that the median tax cut for single parents would be only $326.

 

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April 16, 2001 11:38 AM | Permalink |

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On March 27, Democratic leaders in the Senate introduced a tax cut plan designed as an alternative to the $2.4 trillion tax cut plan proposed by President Bush. The bill, S. 629, would provide a retroactive cut in the bottom income tax rate beginning in tax year 2001, lowering the current 15 percent tax rate to 12.5 percent in 2001 and 10 percent in 2002. The bill would also provide a rebate of 2000 income and payroll taxes up to $600 for couples, $450 for single parents, and $300 for single taxpayers without children. CTJ’s analysis of the tax cuts in S.629 finds that the bottom 60 percent of the income distribution would receive 41.2 percent of the tax cuts from this proposal in tax year 2001. The wealthiest 10 percent of taxpayers, by contrast, would receive 15.2 percent of the tax cuts under the Democratic alternative plan.

• For the typical taxpayer–the twenty percent of taxpayers in the middle of the income distribution–S. 629 would provide a tax cut of $561 a year in 2001.
• For the poorest twenty percent of all taxpayers, the bill would provide an average tax cut of $146.
• The wealthiest 1 percent of taxpayers, with average incomes of $1.1 million, would see an average tax cut of $766 in 2001 under the Senate alternative plan. In contrast, the same group of taxpayers would see an average tax cut of $54,400 under the three components of the Bush tax plan passed by the House of Representatives so far.

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April 11, 2001 11:40 AM | Permalink |

Click here to see this press release in PDF format.
Click here to see the full analysis in PDF format.

A state-by-state analysis of the effects of President George W. Bush’s tax plan finds wide variations in the size of the tax cuts not only by income, but also among the states. In fact, because the Bush tax cuts are so concentrated on the best-off taxpayers and thus in the states where the wealthiest Americans tend to live, the average tax reduction in 31 states is noticeably lower than the national average.

The 35-page report, released by Citizens for Tax Justice, shows that the average tax reductions under the Bush plan, when fully phased in, would range from a high of $1,855 a year per taxpayer in Connecticut down to a low of $708 a year per taxpayer in West Virginia.

• The average tax reductions in Connecticut, Washington, D.C. and Nevada are each more than 25 percent higher than the national average tax cut.
• In contrast, the average tax cuts in West Virginia, Montana, Mississippi, New Mexico, Arkansas, South Carolina and Kentucky are all more than 25 percent below the national average.

The median annual tax cuts–what taxpayers in the middle of the income scale would get–range from a high of $796 a year per taxpayer in Alaska down to a low of $409 a year in Mississippi.

The percentage of taxpayers getting no tax cut at all under the Bush program is particularly high in some states. For example, one out of every three Mississippi taxpayers would get no tax reduction under the Bush plan. That compares to one in six taxpayers who would get no tax cut in New Hampshire, and the national total of 24 percent of taxpayers who would get nothing at all from the Bush program.

“Residents of states that are shortchanged under the Bush tax program might logically prefer something very different than what the President has proposed,” noted CTJ director Robert S. McIntyre. “Alternatives could include debt reduction, continued or enhanced federal services, tax reductions that are distributed differently, or some combination of these that is fairer and makes more economic sense.”

“It’s also plausible that many citizens of states that get above-average tax cuts under the Bush program might favor other options,” McIntyre continued. “They may find the concentration of the Bush tax cuts on the rich (even within their own states) to be unwise or unfair. Or they may find public services and the fiscal and economic health of our nation more important than tax reductions. After all, eight of the 14 states that are targeted for above-average tax cuts voted for Al Gore in the last election.”

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April 9, 2001 02:16 PM | Permalink |

Click here to see this analysis in PDF format.

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Other CTJ Analyses of Bush Plan
HR 6 Bush Tax Cuts Analyzed	3/22/01
HR 3 Bush Rate Cuts Analyzed	3/2/01
Cost of Bush Plan	3/8/01
Revised Analysis of Bush Plan	2/27/01
Bush Plan and Working Families	1/15/00

On April 4, the House of Representatives passed its version of the third part of the Bush tax cuts. The bill, HR 8, would repeal the estate and gift tax by 2011. In combination with the Bush plan’s income tax rate reductions and other income tax cuts previously approved, the three House tax measures put forward so far would provide 45.0 percent of their income tax cuts to the best-off one percent of all taxpayers. In contrast, only 4.8 percent of the tax cuts would go to the poorest 40 percent of taxpayers.

• For the typical taxpayer, the three House measures put forward so far would provide a tax cut of $552 a year if the measures were fully enacted in 2001.
• For the poorest twenty percent of all taxpayers, the three House bills offer an average annual tax cut of $51–less than 1 percent of the total tax cut.
• In contrast, for the wealthiest one percent of taxpayers, with average incomes of $1.1 million, the average annual tax cut under the House measures so far would be $54,400.

In March, the House approved HR 3, which would implement the President’s proposed reductions in income tax rates, including a cut in the top income tax rate from 39.6 percent to 33 percent and smaller reductions in other income tax rates. The House subsequently passed HR 6, which would eventually double the $500 per child tax credit and partially address the “marriage penalty.”

According to the Joint Committee on Taxation (JCT), the first two stages of the Bush tax program would reduce revenues by $1.4 trillion over the next ten fiscal years. The estate tax legislation in HR 8 has been estimated to cost $186 billion over ten years. Counting some $400 billion in added interest on the national debt, that brings the total ten-year cost of the Bush tax cut plan to almost $2 trillion.

Under HR 8’s provisions, the estate tax is not fully repealed until 2011–the last year of the ten-year cost estimate. This means that the real cost of full estate tax repeal is not included in any single year of the ten-year window included in the $186 billion cost estimate. While the JCT’s $186 billion estimate shows an impact of $49 billion in fiscal year 2011, the annual cost of full repeal in the first year after full repeal would be approximately $107 billion–double the fiscal 2011 cost.

Both the Bush plan and the House bills would more than double the number of taxpayers subject to the Alternative Minimum Tax.

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March 14, 2001 02:38 PM | Permalink |

In January of 2001, the Congressional Budget Office increased its estimate of the ten-year federal budget surplus by almost $1 trillion. CBO’s latest revision brings the ten-year total projected surplus to $5.6 trillion. Congressional tax-cutters–and President Bush–see the new projections as an even more compelling argument for substantial tax cuts. On March 8, House Majority Leader Dick Armey declared that “over the next 10 years, American taxpayers will be overcharged by a staggering $5.6 trillion.” Yet the total amount of surplus revenues available for tax cuts is less than what these rosy figures would indicate. Here’s a brief summary of how the projected surplus really adds up in the wake of CBO’s latest projections–and how the Bush plan would affect the available surplus.

Read the Full Report

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