Tag: Archive

March 12, 2001 02:40 PM | Permalink |

In 1986, the federal government ran a budget deficit equal to a staggering 5.0% of the Gross Domestic Product. This year, fiscal 2001, the government is expected to run a surplus (including Social Security and Medicare) of 2.7% of the GDP. How did this astonishing turnaround occur? There are two primary reasons.

• First of all, defense spending plummeted from 6.2% of the GDP in 1986 to 2.9% of the GDP this year. This, of course, reflects the end of the Cold War.
• Second, personal and corporate income taxes rose from 9.3% of the GDP in 1986 to 12.2% of the GDP this year–largely because of tax increases on the highest earners enacted under Presidents George H.W. Bush in 1990 and Bill Clinton in 1993.
• In conjunction with the resulting drop in interest payments on the national debt–from 3.1% of the GDP in 1986 to 2.0% this year–the defense cuts and tax increases explain almost all of the percent of the shift from massive deficits to surpluses since 1986.

Which goes to show that cutting spending and raising revenues was the only logical and effective way to balance the budget. Old-fashioned, but obvious, one might say.

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March 9, 2001 02:41 PM | Permalink |

The Facts:
As everyone knows, under Ronald Reagan, the federal budget deficit ballooned–growing from 2.7% of the Gross Domestic Product in fiscal 1980 to 5.0% of the GDP in 1986. (The deficit actually peaked in 1983, at 6.0% of the GDP, before some of the Reagan policies began to be reversed.). Here’s how that happened:

Changes that lowered the deficit (as shares of GDP)–
 Domestic appropriations. Fiscal 1980: 4.7%. Fiscal 1986: 3.3%. Change: -1.4%
 All other non-defense programs, from fiscal 1980-86. Change: -0.2%
 Non-income-tax revenues (mostly payroll taxes), from fiscal 1980-86. Change: +0.5%
   Net deficit-lowering changes: -2.1%

Changes that increased the deficit (as shares of GDP)–
 Defense spending. Fiscal 1980: 4.9%. Fiscal 1986: 6.2%. Change: +1.3%
 Personal & corporate income taxes. Fiscal 1980: 11.3%. Fiscal 1986: 9.3%. Change: -2.0%
 Interest on the national debt. Fiscal 1980: 1.9%. Fiscal 1986: 3.1%. Change: +1.2%
    Net deficit-increasing changes: +4.4%

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March 8, 2001 11:42 AM | Permalink |

Click here to see this analysis in PDF format.

Newly revised estimates by the Congressional Joint Committee on Taxation show that the cost of the tax plan proposed by President George W. Bush would be substantially greater than the $1.6 trillion estimate generated last year. On March 1, the House Ways and Means Committee approved H.R.3, which would implement the income tax rate cuts proposed by Bush under a slightly accelerated schedule. A March 7 analysis by Citizens for Tax Justice, based in part on JCT’s analysis of H.R. 3, finds that the total ten-year cost of the Bush tax plan, as modified by H.R. 3, would be in excess of $2.4 trillion. In particular, CTJ’s analysis shows that:

How Much Does the Bush Tax Plan Cost? Fiscal Years 2002-2011, $Billions
Bush May 2000 Estimate:	$1,564
Add: Speeding up rate cuts, new CBO projections	$148
Subtotal:	$1,712
Add: Cost of fixing AMT (Bush-caused part only)	$292
Subtotal:	$2,004
Add: Interest payments	$413
TOTAL COST:	$2,417

• H.R. 3’s accelerated income tax rate cuts, combined with revised estimates of economic growth since last May, increase the cost of the Bush plan by $150 billion over ten years. This brings the ten-year cost of the Bush plan’s provisions to over $1.7 trillion.
• Because the Bush plan (like H.R. 3) reduces income tax rates without modifying the Alternative Minimum Tax (AMT), millions of additional taxpayers would be forced to pay the AMT when the plan is fully phased in, an outcome which all parties agree is unrealistic. According to JCT, adjusting the AMT to fix this problem would add almost $300 billion to the Bush plan’s cost. That brings the ten-year cost to just over $2.0 trillion.
• The $2.0 trillion cost of the Bush plan reduces the amount of surplus revenues that can be devoted to reducing the federal debt by $2.0 trillion. This means that the federal government will pay an additional $413 billion in interest payments as a direct result of the Bush plan. Factoring in these additional interest payments brings the ten-year total cost of the Bush plan to $2.417 trillion.

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March 8, 2001 11:40 AM | Permalink |

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The House of Representatives is set to vote next week on its version of the second part of the Bush income tax cuts. In combination with the Bush income tax rate reductions previously approved, the House tax measures put forward so far would provide 31.3 percent of their income tax cuts to the best-off one percent of all taxpayers. In contrast, only 6.3 percent of the tax cuts would go to the bottom 40 percent.

• For the typical taxpayer, the House measures put forward so far would provide a tax cut of $544 a year (in today’s dollars), once the measures are fully in place in 2009.
• For the poorest fifth of all taxpayers, the House bills offer an average annual tax cut of $50.
• 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 $28,608.

Earlier this month, 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 is now moving forward with HR 6, which would eventually double the $500 per child tax credit and partially address the “marriage penalty.” The House measures in HR 6 differ in detail from the President’s proposals in a number of ways, but the overall size and distribution of the House income tax cuts is almost identical to the income tax cuts proposed by the President.

According to the Joint Committee on Taxation, these first two stages of the Bush tax program would reduce revenues by $1.4 trillion over the next ten fiscal years. Still to come is the Bush proposal to repeal the estate tax on the wealthiest two percent, which has been previously estimated to reduce revenues by more than $300 billion over ten years. Counting some $400 billion in added interest on the national debt, that would bring the total cost of the Bush tax cut plan to about $2.1 trillion so far.

Both the Bush plan and the House bills would more than double the number of taxpayers subject to the Alternative Minimum Tax. The “AMT” effects would be somewhat more severe under the House bills, where one taxpayer in six would be subject to the AMT, compared to one out of seven under the Bush program.

Some 24 percent of taxpayers (31.2 million) would get no income tax cut from the House bills, compared to 26 percent (34.5 million) under the Bush program

 

 

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March 2, 2001 11:44 AM | Permalink |

On March 1, the House Ways and Means Committee approved the biggest item in President George W. Bush’s tax plan, a sharp reduction in personal income tax rates. Republicans and Democrats on the Committee generally agreed on the size of the tax cuts for all but the richest taxpayers. But they sharply differed on the tax breaks for the best-off one percent, and thus on the overall size of the tax cut.

The GOP plan, which passed on a party-line vote, offers the top income group an average tax cut of more than $28,000 a year once the plan is fully in place. In contrast, the Democratic plan would limit its tax breaks for the top one percent to $737 a year.

Two Competing Income Tax Cuts
	Republicans		Democrats
Income Group	Average Tax Cut	% of Tax Cut	Average Tax Cut	% of Tax Cut
Lowest 20%	$ –41	1.3%	$ –81	4.4%
Second 20%	–168	5.3%	–167	9.1%
Middle 20%	–316	9.9%	–289	15.7%
Fourth 20%	–511	16.0%	–531	28.8%
Next 15%	–761	17.9%	–781	31.8%
Next 4%	–838	5.3%	–763	8.3%
Top 1%	–28,256	44.3%	–737	2.0%
ALL	$ –633	100.0%	$ –366	100.0%
ADDENDUM
Bottom 60%	$ –175	16.5%	$ –179	29.1%
Top 10%	–3,603	56.5%	–768	20.8%

Under the Republican income tax plan, the wealthiest one percent would get 44.3 percent of the total income tax reductions. Under the Democratic plan, the top one percent would get two percent of the total tax breaks.

As a result, the GOP plan would total $958 billion over the next decade, according to the Joint Committee on Taxation. Including $258 billion in added interest on the national debt, the total cost would be $1.2 trillion over ten years. The Democrats’ alternative would cost only about half as much, even though the tax reductions for all but the top income group would be almost identical–or, in the case of the poorest taxpayers, larger–than under the GOP plan.

“The battle lines have been drawn,” said Robert S. McIntyre, director of Citizens for Tax Justice. “Both sides agree on tax cuts for middle-income families. But one side believes the wealthy are especially needy–apparently compared to almost any other public priority.”

The GOP income tax rate reductions are identical to those proposed by President Bush, with a portion of the cuts accelerated to tax year 2001. Under the plan, the top income tax rates, now 36 percent and 39.6 percent, would be reduced to 33 percent; the current 28 percent and 31 percent rates would be reduced to 25 percent; the current 15 percent rate would be continued; and a new bottom rate of 10 percent would apply to the first $12,000 in taxable income for couples and $6,000 for singles. The rate reductions would be phased in, and would take full effect in 2006.

The Democratic income tax cuts include a new 12% tax bracket, applicable to the first $20,000 in taxable income for couples, $16,000 for single parents and $10,000 for single taxpayers without children; an increase in the standard deduction for couples to double the single amount; and enhancements to the earned-income tax credit for moderate-income working families. The provisions would be phased in, and would be fully effective in 2003.

The GOP plan envisions a vast expansion in the number of taxpayers in the top fifth of the income distribution (but not the top one percent) who would have to pay the Alternative Minimum Tax. According to the Joint Committee on Taxation, by 2008, some 24 million taxpayers would pay the complicated “AMT” under the GOP plan. This result is very unlikely to be politically acceptable, but it reduces the apparent cost of the GOP income tax rate cuts by almost a quarter over ten years.

When fully in place, the Bush income tax rate cuts would represent about half the total cost of Bush’s proposed tax cuts, apparently leaving another trillion dollars or so in Bush tax cuts still awaiting congressional action.

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February 27, 2001 11:45 AM | Permalink |

Click here to see this analysis in PDF format.

The tax cut plan advocated by President George W. Bush would target most of its benefits to the wealthiest taxpayers if fully enacted in 2001, according to an analysis of the plan released today by Citizens for Tax Justice. (Previous CTJ analyses measured the impact of the Bush plan at 1999 levels.) The analysis shows that more than sixty percent of Bush’s proposed tax cuts would go to the best-off 10 percent of Americans.

According to the analysis:

• Taxpayers in the lowest 60 percent of the income scale would get only 12.7 percent of Bush’s tax cuts. Their average annual tax reduction would be $256.
• The bottom 20 percent of taxpayers would see an average tax cut of $47 a year.
• In contrast, the best-off 10 percent of all taxpayers would get 60.3 percent of Bush’s proposed tax cuts, and an average tax cut of $7,300 a year.
• The wealthiest one percent of all taxpayers would get an average tax reduction of $54,480 a year–45 percent of the total tax cut.

The income tax cuts under the Bush plan would affect different demographic groups in substantially different ways, with larger average tax cuts going to married couples filing jointly and to families with children. In particular:

• Married couples filing jointly, with a median 2001 income of $60,200, would receive an average income tax cut of $1,095 under the Bush plan. Unmarried taxpayers, with a median 2001 income of $22,800, would receive an average of $279.
• Families with children, with a median 2001 income of $45,600, would receive an average income tax cut of $1,114. Taxpayers without children, with a median 2001 income of $30,000, would receive an average tax cut of $294.
• Single parents, with a median income of $22,600, would receive an average of $326 under the Bush plan’s income tax provisions. Married non-elderly couples without children, with a median income of $63,900, would receive an average of $898.

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February 15, 2001 11:46 AM | Permalink |

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

President George W. Bush’s proposed tax breaks for the best-off one percent of Americans would cost more than the total amount of money needed to pay for a comprehensive Medicare prescription drug benefit for all seniors, according to a study released today by Citizens for Tax Justice and USAction.

“Our choices are stark. Do we want to give 39 million senior citizens the respect they deserve with prescription drug coverage under Medicare? Or do we give $774 billion in tax giveaways to a million millionaires?” asked William McNary, President of USAction.

The report, Bad Policy, Bad Medicine, reveals that over a ten-year period the wealthiest one percent of Americans would receive $774 billion in tax breaks–while a fully funded comprehensive Medicare prescription drug benefit for America’s seniors would cost a net of $738 billion.

“Last year, Dick Cheney famously claimed that he had to vote against Head Start in the early 1980s because he had voted for the 1981 Reagan corporate and upper-income tax cuts instead,” noted Robert S. McIntyre, director of Citizens for Tax Justice. “Well, we’re seeing the same thing again this year. President Bush says we can’t afford anything but a miserly prescription drug plan because he wants to use all available resources for tax breaks for the rich.”

“A narrow slice of the population–the wealthiest one percent, whose incomes average over one million dollars–would receive 43 percent of the total Bush tax cuts,” McIntyre pointed out.

Seniors have been the victims of skyrocketing drug costs and have greater out-of-pocket prescription costs as a percentage of their incomes than any other group.

“My wife and I pay $18,400 annually for prescription medication and supplemental premiums,” said Bill McHugh, a retiree from Narberth, PA. “This is an enormous hardship. I’m a Republican,” noted McHugh, “and though I would realize some savings from this tax cut, I think the President has wrongly prioritized his agenda. He should pass a comprehensive Medicare prescription benefit, rather than giving a huge tax windfall to millionaires.”

“President Bush has made his choice clear. He favors a huge tax cut for the wealthy and an inadequate prescription drug plan that will only help one percent of seniors, “said John Marvin, Regional Director of the Association of Retired Americans and board member of USAction. “Today we are calling on Congress to put first things first. Take care of filling the prescriptions for our seniors instead of filling the bank accounts of one million millionaires.”

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February 12, 2001 11:48 AM | Permalink |

Click here to see this analysis in PDF format.

President George W. Bush has proposed a tax cut plan that would give some 43 percent of its tax cuts to the best-off one percent of all taxpayers. Recently, Bush cheerfully characterized himself as a member of that elite group. That’s certainly true. In fact, based on the non-wage income the Bushes reported on their 1999 tax returns plus the $400,000 presidential salary, the Bushes are likely to report total adjusted gross income in each of the next several years in excess of $2 million annually.

So how would the Bush tax cut plan affect the President and his wife?

The following table looks at the likely effects of the Bush income tax cuts on George W. and Laura Bush, from 2002 when the plan begins to be phased in through 2006 when the income tax cuts are fully in place. The figures show that by the time the tax cuts are fully in place, the Bushes can expect a reduction in their federal income tax bill of almost $100,000 a year.

Effects of the Bush Income Tax Cuts on George W. & Laura Bush Year by Year Estimates as the Tax Plan is Phased In
(Non-wage income & deductions are based on what the Bushes reported in 1999)
	2002	2003	2004	2005	2006
Salary	$ 400,000	$ 400,000	$ 400,000	$ 400,000	$ 400,000
Capital gains	669,000	716,000	766,000	820,000	877,000
Interest	957,000	1,024,000	1,096,000	1,173,000	1,255,000
Dividends	106,000	113,000	121,000	129,000	138,000
Adjusted gross income	2,132,000	2,253,000	2,383,000	2,522,000	2,670,000
Deductions—
Gross deductions	93,000	98,000	103,000	108,000	113,000
Deduction disallowed	–60,000	–63,000	–67,000	–71,000	–76,000
Net deductions	33,000	35,000	36,000	37,000	37,000
Taxable income	2,039,000	2,155,000	2,280,000	2,414,000	2,557,000
Taxable w/o capital gains	1,370,000	1,439,000	1,514,000	1,594,000	1,680,000
Income tax
Current law	647,400	683,400	722,400	764,100	808,800
Bush plan	627,700	650,600	673,000	698,600	709,000
Tax Cut Each Year	$ –19,700	$ –32,800	$ –49,400	$ –65,500	$ –99,800
Note: figures do not include the effects of the Bush estate tax repeal or corporate tax breaks. Citizens for Tax Justice, Feb. 12, 2001

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February 12, 2001 11:47 AM | Permalink |

Click here to see this analysis in PDF format.

Advocates of President Bush’s proposed $1.6 trillion tax cut argue that the plan’s tax reductions are needed in order to stimulate the economy. Yet all of the costliest provisions of George W. Bush’ tax proposal are phased in over a number of years. This means that the actual tax cuts experienced by taxpayers during the first several years after passage would be substantially less than the “fully phased in” tax cuts described in previous CTJ analyses. The following analysis estimates the average tax cuts accruing to taxpayers at each income level during the first three years after enactment, and describes the schedule according to which the Bush plan’s various provisions would be enacted.

 

Average Tax Cuts under the Bush Tax Plan in Its First Three Years
		Average Income	Average Bush tax cuts in:
Income group	Income Range		2002	2003	2004
Lowest 20%	Less than $16,000	$ 10,020	$ –15	$ –25	$ –37
Second 20%	$16,000–29,000	22,400	–71	–121	–174
Middle 20%	$29,000–48,000	37,500	–170	–286	–409
Fourth 20%	$48,000–79,000	61,400	–316	–513	–761
Next 15%	$79,000–159,000	106,000	–588	–884	–1,352
Next 4%	$159,000–397,000	226,000	–1,043	–1,390	–2,102
Top 1%	$397,000 or more	1,164,000	–13,469	–18,859	–31,201
Average tax cuts are shown by calendar years in each year’s dollars. Average incomes and income ranges are estimates for calendar 2003. Source: Institute on Taxation and Economic Policy Tax Model. Citizens for Tax Justice, Feb. 8, 2001

• The poorest twenty percent of taxpayers would, on average, receive a $15 tax cut in tax year 2002, the first year for which the Bush plan would affect federal revenues. By tax year 2004, the average tax cut for this group would increase to $37.
• The twenty percent of taxpayers in the middle of the income distribution would receive an average of $170 in tax cuts under the Bush plan in 2002, and an average of $409 in 2004.
• The average tax cut accruing to the top 1 percent of taxpayers–those earning more than $397,000 in 2003–would be $13,469 in 2002, and would increase to $31,201 in tax year 2004.

All of the income tax rate reductions proposed under the Bush plan would be phased in gradually between tax years 2002 and 2006. The proposed new “ten percent” rate would actually be a 14 percent rate in 2002, and would decline by a single percentage point each year until 2006, when the 10 percent rate would take effect. The other reduced tax rates would also be fully effective only in 2006. The doubling of the child credit–and the increase in the phase-out of the credit–would take effect over the same time period.

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February 8, 2001 11:49 AM | Permalink |

Click here to see this analysis in PDF format.

On February 8, President Bush submitted a tax cut proposal to Congress that is patterned after a $1.6 trillion ten-year tax reduction proposed by candidate Bush during the 2000 presidential campaign.

Bush has claimed that under his plan, the “average” family would receive a tax cut of $1,600. However, this claim is misleading.

• Almost ninety percent of taxpayers would receive less than $1,600 in tax cuts if the Bush plan were fully implemented in 1999.
• Moreover, 27 percent of taxpayers would receive no tax cut at all under the Bush plan.

Number of Taxpayers With Little or No Income Tax Cut Under George W. Bush’s Tax Plan (Numbers of taxpayers in thousands)
Income Group	Number of tax units	Income Range	Average Income	# with No Tax Cut	%	# with Less Than $1,600 Tax Cut	%
Lowest 20%	25,323	Less than $13,600	$ 8,600	18,945	74.8%	25,323	100.0%
Second 20%	25,324	$13,600–24,400	18,800	9,341	36.9%	25,324	100.0%
Middle 20%	25,325	$24,400–39,300	31,100	3,267	12.9%	24,906	98.3%
Fourth 20%	25,326	$39,300–64,900	50,700	663	2.6%	23,160	91.4%
Next 15%	18,994	$64,900–130,000	86,800	641	3.4%	11,591	61.0%
Next 4%	5,065	$130,000–319,000	183,000	559	11.0%	2,689	53.1%
Top 1%	1,264	$319,000 or more	915,000	144	11.4%	358	28.3%
ALL	127,585		$ 50,800	34,526	27.1%	114,315	89.6%
ADDENDUM
Bottom 60%	75,972	Less than $39,300	$ 19,500	31,553	41.5%	75,553	99.4%
Top 10%	12,660	$92,500 or more	218,000	945	7.5%	5,432	42.9%
Source: Institute on Taxation and Economic Policy Tax Model. Citizens for Tax Justice, August 2000, updated 2/7/2001

The Bush plan would treat married couples more generously than other tax filers. The typical married couple filing jointly would receive an income tax cut of $1,028 under the Bush plan, when it is fully in place in 2006.

But the typical single taxpayer would get only $249 from the Bush plan. In contrast, counting all the elements of the Bush tax program, the best off one percent of all taxpayers would get an average annual tax cut of $46,000 (in 1999 dollars)– almost 43 percent of the total tax cut.

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