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Gop taxcuts favoring wealthy { May 3 2003 } Original Source Link: (May no longer be active)
http://www.nytimes.com/2003/05/03/politics/03TAXE.htmlhttp://www.nytimes.com/2003/05/03/politics/03TAXE.html
http://commondreams.org/headlines03/0503-01.htm
May 3, 2003
House G.O.P. Tax Cuts Outdo Bush Plan in Favoring Wealthy
By DAVID E. ROSENBAUM
WASHINGTON, May 2 — The tax-cut plan offered this week by Republican leaders in the House would be even more favorable to the wealthiest taxpayers than the larger plan proposed by President Bush, and those with incomes of less than $50,000 would have smaller tax reductions than under the Bush plan, a computer analysis showed today.
The analysis by the Tax Policy Center at the Urban Institute and the Brookings Institution found, for example, that taxpayers with incomes of more than $1 million would get an average tax cut this year of $105,636 under the plan outlined on Thursday by Representative Bill Thomas of California, the chairman of the House Ways and Means Committee. Under the Bush proposal, the average cut for these people would be $89,509.
By the same token, taxpayers with incomes between $50,000 and $75,000 would get an average tax cut this year of $734 under the the Bush plan and $712 under the Thomas plan; those with incomes between $40,000 and $50,000 would get an average cut of $482 under the Bush plan and $456 under the Thomas version. Similar disparities exist with the smaller tax cuts at lower income levels. Eighty-four percent of all taxpayers have incomes of less than $75,000.
The main difference between the two plans is that the president would eliminate the tax on most stock dividends but would not change capital gains taxes. The House plan would lower the tax on capital gains — now 18 percent or 20 percent in most cases — to 15 percent and tax income from dividends, now taxed at rates up to 38.5 percent, also at 15 percent.
Rich people, because they have more to invest, are the main beneficiaries of capital gains and dividends. But they have a larger proportion of total capital gains, which are profits from the sale of investments, than they do of dividends. So they benefit even more when the capital gains rate is reduced than they do from eliminating the tax on dividends.
Taxpayers with incomes of more than $1 million would save an average of $42,800 this year from the Thomas approach of lowering the rate on capital gains and dividends. They would save an average of $26,800 from eliminating the tax on most dividends.
The rest of the tax savings this year would come mainly from provisions that would lower tax rates across the board. Other savings would come from an increase in the credit for children and a bonus for married couples. These provisions are the same in the Bush and Thomas plans as they apply to this year's taxes.
Mr. Thomas did not comment on the study. "We haven't had time to even think about this," said his spokeswoman, Christin Tinsworth.
Mr. Thomas and other Republicans are generally contemptuous of these kinds of studies, which are called distributional analyses. Republicans are not concerned when the most affluent people in the country get the bulk of tax cuts, because they pay the bulk of the taxes. The best way to improve the economy, in the Republican view, is to give money to the people who are most likely to invest it.
Another study released today showed that if special provisions called sunsets that Mr. Thomas put in his bill to keep the cost down are factored out, the total cost in lost revenue over 10 years would reach more than $1 trillion, far greater than the $550 billion allowed under the budget Congress approved last month and the $726 billion the president proposed. This study was done by the Center on Budget and Policy Priorities, a liberal policy institute.
This study and the computer analysis of benefits at different income levels were conducted by Democratic analysts who are opposed to Republican tax-cut policies. But the findings were based on impartial data from the Internal Revenue Service, the Congressional Budget Office and the Joint Congressional Committee on Taxation.
The sunsets are provisions that put popular tax cuts in place this year but make them expire at the end of 2005 to save money under the 10-year calculations. Mr. Thomas did this with the child credit, the marriage bonus and an expansion of the 10 percent tax bracket, all of which are popular because they benefit masses of middle-income taxpayers. Another tax break that would expire after 2005 would allow increased write-offs for small businesses.
Mr. Thomas left no doubt on Thursday when he outlined his plan to reporters that he expected Congress to make these provisions permanent before they expired. Altogether, he saved about $100 billion in projected lost revenue by sunsetting, the Center on Budget and Policy Priorities calculated.
Another provision that would expire in 2005 would extend more generous depreciation write-offs for large companies for their expenses on plants and equipment.
This was originally written to encourage investment during hard times for businesses, and it is not so clear whether Congress would be eager to extend it past 2005 if the economy improved. But if it was extended for the full 10 years covered by the legislation, it would cost another $400 billion in lost revenue, bringing the total cost of the package to more than $1 trillion, the center calculated.
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