Income tax cuts benefit all payers

This pretty much blows the Dems line of “Tax Cuts for the Rich” completely out of the water. 

From USA Today 

Americans of every income have benefited from a drop in federal income tax rates as Bush administration tax cuts enacted since 2000 took effect, an independent analysis of newly released IRS data shows.

But those earning $75,000 to $500,000 are shouldering a larger share of total taxes paid as millions more of them earn higher incomes and get hit with the Alternative Minimum Tax, the analysis also found.

The review by the Tax Foundation, a non-partisan research group that favors low taxes, provides one of the first detailed looks at the impact of federal tax changes phased in between 2000 and 2004.

Alluding to the political debate that often surrounds tax issues, Gerald Prante, a Tax Foundation economist, said, “It is true that in dollar amounts the rich have gained the most. But everybody’s tax rates have fallen.”

The analysis showed, for example, that a taxpayer who earned $35,000 in 2000 would have paid 8.54% of that income — $2,989 after credits — in federal taxes. In 2004, federal taxes would have accounted for 5.12% of that taxpayer’s annual income, or $1,792. That represents a 40% decrease in tax burden.

At the higher end of the income brackets, a $1.75 million earner would have paid $513,625 in 2000 federal taxes, when the rate for that earning bracket was 29.35%. Four years later, when the rate dropped to 25%, that earner would have paid $437,500. That represents a 14.8% cut in tax burden, the analysis shows.

Millions of upper-middle and moderately high-income earners also benefited from tax rate cuts. But the analysis shows their savings was limited by the Alternative Minimum Tax, which eliminates some deductions and credits they could otherwise claim on federal tax returns. The levy particularly hits those whose high state and local taxes become ineligible for federal tax deductions.

For instance, taxpayers who earned between $100,000 and $200,000 in 2004 paid 22.5% of all federal taxes, up from 19.4% four years earlier. Those who earned between $200,000 and $500,000 in 2004 paid 17.9% of all federal taxes, up from 15.4% in 2000, the analysis showed.

Prante said the federal government “cut ordinary income tax rates but left AMT alone. So the middle range (of taxpayers) ended up getting less of a reduction.”

The Tax Foundation also found that:

• Millions of lower-income Americans — those earning $25,000 annually or less — have been taken off the federal tax rolls. In 2000, roughly 29 million tax returns had no federal tax owed. Four years later, the number rose to about 43 million returns.

The increase resulted from the doubling of the child tax credit from $500 to $1,000, as well as the Earned Income Tax Credit, a federal benefit program for low-income workers.

• Income for the highest-earning Americans dropped sharply from 2000 to 2002, following the end of the bull stock market of the late 1990s, then grew rapidly from 2002 to 2004 as the economy recovered.

Others Blogging:

GOP Bloggers

 

Advertisements



    Leave a Reply

    Fill in your details below or click an icon to log in:

    WordPress.com Logo

    You are commenting using your WordPress.com account. Log Out / Change )

    Twitter picture

    You are commenting using your Twitter account. Log Out / Change )

    Facebook photo

    You are commenting using your Facebook account. Log Out / Change )

    Google+ photo

    You are commenting using your Google+ account. Log Out / Change )

    Connecting to %s



%d bloggers like this: