The Wealth Concentration Act
The House of Representatives has approved an economic stimulus
bill that over the next three years would almost double the size of the
Bush tax cuts enacted last May. Officially, the new corporate and individual
tax cuts are estimated to cost $212 billion over the next three fiscal
years (and the actual cost is likely to be considerably higher).
A distributional analysis of the bills effect in calendar 2002
finds:
Forty-one percent of the tax cuts would go to the best-off 1 percent
of all taxpayers, whose average tax cut in 2002 would be almost $27,000
each.
Almost three-quarters of the 2002 tax cuts would go to the best
off tenth of all taxpayers.
Only 7 percent of the tax cuts would go the bottom three-fifths
of taxpayers.
Corporate tax cuts
Major corporate tax cuts in the House stimulus tax bill include:
The largest corporate tax loophole under current law
accelerated depreciation would be almost doubled, at an estimated
cost of $109 billion over the next three years. Ostensibly, these additional
tax subsidies will expire after 2004, but similar temporary
measures enacted in the past have typically been routinely extended.
The bill would permanently repeal the corporate alternative minimum
tax that now discourages corporate tax sheltering and forces some otherwise
low- and no-tax large, profitable corporations to pay at least something
in taxes. In addition, companies that paid the minimum tax in the past
would get an immediate refund of those payments. This would officially
cost $24 billion over 10 years, and more likely two or three times that
much due to increased tax sheltering not reflected in the official
estimate. A large share of this money would go to just a handful of
companies, including IBM, General Motors, General Electric, and Chevron
Texaco.
The bill would make it easier for corporations with tax
losses to use them to apply for refunds of taxes they paid in
the past, at a cost of more than $10 billion over the next three years.
Like the increase in depreciation write-offs, this provision is technically
supposed to expire after 2004.
An expiring current-law tax shelter for multinational corporations,
notably General Electric and the major auto companies, which allows
them to shift taxable profits off-shore through manipulations of interest
payments would be made permanent. The estimated cost over 10 years is
$21 billion.
Individual tax cuts
Among the key cuts for individuals:
The top income tax rate on capital gains would be reduced from
20 percent to 18 percent. Assuming no increase in realized gains, this
would cut taxes by $10 billion in calendar 2002 alone (with three-quarters
of that going to the top 1percent). If as some predict, realizations
go up, then the upper-income tax savings will be even larger.
The cut in the former 28 percent tax rate to 25 percent, scheduled
to take effect in 2006 under the Bush tax-cut bill enacted earlier this
year, would be accelerated to 2002. (Unless changed, under current law
the rate will be 27 percent in 2002 and 2003, 26 percent in 2004 and
2005, and 25 percent in 2006 and thereafter.)
Individual exemptions from the alternative minimum tax would
be temporarily increased.
The 2001 tax rebates of $600 for couples, $500 for single parents,
and $300 for childless singles would be extended to about 37 million
couples and individuals who did not get them or got less than the full
amounts. To qualify, a person or couple must have filed a tax return
for tax year 2000. For those affected, the $13.7 billion in additional
2001 rebates would average about $350.
Citizens for Tax Justice
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