Who Got What!
In a previous article (Whose Tax Cut?), TheRealTruth revealed who will
benefit the most from the tax rate changes in the President’s new tax plan. In
a follow-up article (Double Taxation!),
we showed how adding the elimination of the tax on dividends to the tax plan primarily
benefited the upper middle class and the rich. However, after considerable
debate and extensive negotiations, the final tax cut passed by Congress did not
totally eliminate the tax on dividends.
Congress, concerned over the looming budget deficit, was forced to scale
back the size of the dividend cut to about half of what the President had
proposed. TheRealTruth has now obtained
another CBO table, one that reflects the effects of the final tax bill. The
differences, before and after, are worth studying just to see who really got
what from the tax cuts.
|
|
|
CBO 2002 Tax Revenue Estimates |
|
|||
|
AGI Limits ($) |
Returns |
Tax Rate |
Revenue |
Total Taxes |
||
|
Lower |
Upper |
(thosands) |
Current (%) |
Current ($M) |
Current (%) |
|
|
0 |
10000 |
25755 |
-6.7 |
-8.63 |
-0.9 |
|
|
10000 |
20000 |
23602 |
-3.0 |
-10.62 |
-1.1 |
|
|
20000 |
30000 |
18644 |
3.8 |
17.71 |
1.8 |
|
|
30000 |
40000 |
13534 |
7.0 |
33.16 |
3.3 |
|
|
40000 |
50000 |
10307 |
9.0 |
41.74 |
4.1 |
|
|
50000 |
75000 |
17874 |
10.3 |
115.06 |
11.4 |
|
|
75000 |
100000 |
10224 |
12.3 |
110.04 |
10.9 |
|
|
100000 |
200000 |
9906 |
16.0 |
237.74 |
23.5 |
|
|
200000 |
500000 |
2395 |
23.0 |
192.80 |
19.1 |
|
|
500000 |
1000000 |
418 |
27.7 |
86.84 |
8.6 |
|
|
1000000 |
5000000 |
226 |
28.8 |
195.26 |
19.3 |
|
|
|
Total |
132885 |
|
1011.11 |
100.0 |
|
The reduction of taxes on stock dividends
still favored the rich and upper middle classes more than the poor and lower
middle classes because the rich and upper middle class are more likely to own
stocks. The first table shows the CBO’s estimate of 2002 tax revenues under the old tax law;
the second table shows what those tax revenues look like under the changes in
tax rates only; and the new table shows what they look like with the reduction
of the tax on dividends included. These
tables were supplied to TheRealTruth
by sources in the Congressional Budget Office (CBO) who need to remain
anonymous for obvious reasons.
|
|
|
How Tax Rate Changes Affect Your Taxes |
|
|||
|
AGI Limits ($) |
Tax Rate |
Revenue |
Total Taxes |
Average |
||
|
Lower |
Upper |
Proposed (%) |
Proposed ($M) |
Proposed (%) |
Change ($) |
|
|
0 |
10000 |
-6.9 |
-8.89 |
-1.0 |
-10 |
|
|
10000 |
20000 |
-3.5 |
-12.39 |
-1.4 |
-75 |
|
|
20000 |
30000 |
3.0 |
13.98 |
1.5 |
-200 |
|
|
30000 |
40000 |
6.1 |
28.90 |
3.2 |
-315 |
|
|
40000 |
50000 |
8.0 |
37.11 |
4.1 |
-450 |
|
|
50000 |
75000 |
9.1 |
101.66 |
11.2 |
-750 |
|
|
75000 |
100000 |
10.4 |
93.04 |
10.3 |
-1663 |
|
|
100000 |
200000 |
14.3 |
212.48 |
23.4 |
-2550 |
|
|
200000 |
500000 |
21.6 |
181.06 |
20.0 |
-4900 |
|
|
500000 |
1000000 |
25.3 |
79.32 |
8.7 |
-18000 |
|
|
1000000 |
5000000 |
26.7 |
181.03 |
20.0 |
-63000 |
|
|
|
Total |
|
907.29 |
100.0 |
|
|
The first two tables, originally published
in Whose Tax Cut? on
April 15th, indicate that the President’s cut in tax rates favored neither the
rich nor the poor. Although the dollar
amount of the tax cuts differed significantly due to significant differences in
adjusted gross income (AGI), percentage-wise it left the tax burden largely
unchanged, as evidenced by the percentage of total income taxes paid by each
tax bracket. Before the tax rate change
taxpayers earning more than $1,000,000 were paying 19.3% of the total income taxes while taxpayers in the
$50,000-75,000 tax bracket were paying 11.4%
and taxpayers in the $20,000-30,000 tax bracket were paying 1.8% of the total taxes. After the tax rate changes they were paying 20%, 11.2%, and 1.5%,
respectively, of the total taxes.
|
|
|
How Final
Tax Plan Affects Your Taxes |
|
||
|
AGI Limits ($) |
Tax
Rate |
Revenue |
Total
Taxes |
Average
|
|
|
Lower |
Upper |
Proposed (%) |
Proposed ($M) |
Proposed
(%) |
Change ($) |
|
0 |
10000 |
-6.9 |
-8.89 |
-1.2 |
-10 |
|
10000 |
20000 |
-3.5 |
-12.39 |
-1.6 |
-75 |
|
20000 |
30000 |
3.0 |
13.98 |
1.8 |
-200 |
|
30000 |
40000 |
6.1 |
28.90 |
3.8 |
-315 |
|
40000 |
50000 |
7.9 |
36.64 |
4.8 |
-495 |
|
50000 |
75000 |
9.0 |
100.54 |
13.2 |
-812 |
|
75000 |
100000 |
9.8 |
87.67 |
11.5 |
-2188 |
|
100000 |
200000 |
12.3 |
182.77 |
24.0 |
-5550 |
|
200000 |
500000 |
16.8 |
140.83 |
18.5 |
-21700 |
|
500000 |
1000000 |
18.4 |
57.68 |
7.6 |
-69750 |
|
1000000 |
5000000 |
19.5 |
132.21 |
17.4 |
-279000 |
|
|
Total |
|
759.94 |
100.0 |
|
When the effects of the reduction of taxes
on stock dividends is factored in, however, the new CBO table shows a
significant reduction in the percent of total income taxes paid by the rich
with a corresponding increase in the percent of total taxes paid by taxpayers
in the middle tax brackets and a slight decrease in the percent of total taxes
at the lowest tax brackets. While before
the tax changes the above taxpayers were paying 19.3%, 11.4%, and 1.8%, respectively, of the total taxes,
those same taxpayers are now paying 17.4%,
13.2%, and 1.8%, respectively, of the total taxes. So, in a new twist to the old saying, the
rich got richer, but it was not the poor that got poorer. It was the middle class.
This
is the Real Truth!