Citizens for Tax Justice , 202-626-3780 January 30, 2003
Senate Democratic Tax Cut Plan:
Bigger Tax Cuts for Most Taxpayers & More Economic Stimulus than Bush Yet Far Less Costly Over the Long Term

Click here to see this analysis in PDF format.

Related CTJ Analyses
Distributional Analysis of Bush 2003 Tax Plan1/27/03
Cost of Bush 2003 Tax Plan Estimated2/3/03

The Senate Democratic tax cut plan introduced by Minority Leader Tom Daschle (D-S.D.) offers substantially larger tax relief to most taxpayers this year than President Bush’s latest tax cut proposal, provides far more economic stimulus this year, and at the same time is far less costly over the long-term—thereby avoiding the big budget-deficit expansion that the President favors.

An analysis of the Democratic plan released by Citizens for Tax Justice finds:

  • Under the Democratic plan, almost all families and individuals (94 percent) would receive tax relief. Under the President’s plan, a third of taxpayers would get absolutely nothing, and almost half would get less than $100.
  • Middle-income taxpayers would get an average tax cut of $542 under the Democratic plan, compared to $289 under the President’s proposal.
  • Low-income individuals and families would get an average of $266 each from the Democratic plan, compared to $6 under the President’s proposal.

The richest one percent of taxpayers would average $817 in tax breaks under the Democrats’ plan, versus $30,127 each under the Bush program.

The Senate Democratic 2003 Tax Cut Plan vs. the Bush 2003 Plan, in 2003
  Senate Democrats’ Plan Bush Plan
Income Group Income Range Average Income % with tax cut Average tax cuts (all) % of total tax cut % with tax cut Average tax cuts (all) % of total tax cut
Lowest 20% Less than $16,000 $ 9,900 75% $ –266 9.8% 8% $ –6 0.1%
Second 20% $16,000 – 29,000 22,000 96% –444 16.4% 59% –99 2.1%
Middle 20% $29,000 – 46,000 36,600 99% –542 20.0% 82% –289 6.2%
Fourth 20% $46,000 – 77,000 59,800 100% –675 24.9% 97% –657 14.2%
Next 15% $77,000 – 154,000 103,000 100% –777 21.5% 99% –1,841 29.7%
Next 4% $154,000 – 374,000 217,000 100% –804 5.9% 99% –3,524 15.2%
Top 1% $374,000 or more 1,082,000 100% –817 1.5% 97% –30,127 32.4%
ALL   $ 60,100 94% $ –539 100.0% 69% $ –922 100.0%
ADDENDUM
Bottom 60% Less than $46,000 $ 22,900 90% $ –418 46.2% 50% $ –131 8.5%
Top 10% $110,000 or more 259,000 100% –798 14.7% 99% –5,578 60.1%

The Democrats’ plan would provide a refundable tax credit equal to 10 percent of adjusted gross income. The maximum would be $300 per taxpayer ($600 for couples), plus $300 per child (up to two children). Thus:

  • A single person with no children would receive up to $300. Married couples without children would get up to $600.
  • A single parent with one child would get up to $600. Married couples with one child would get up to $900.
  • A single parent with two or more children would get up to $900. Married couples with two or more children would get up to $1,200.

For typical taxpayers of each family type, the actual tax credits would generally equal (or be very close to) the maximum amounts.

Sen. Democrats Plan
By Family Type 		  Averages (for all taxpayers in each group)
Married couples   Others
Income range No kids 1 kid 2+ kids No kids 1 kid 2+ kids
Less than $16,000 $ 290 $ 610 $ 710 $ 200 $ 430 $ 370
$16,000 – 29,000 430 840 1,080 290 580 820
$29,000 – 46,000 580 890 1,190 300 600 890
$46,000 – 77,000 600 900 1,200 300 600 890
$77,000 – 154,000 600 900 1,200 300 600 900
$154,000 – 374,000 600 900 1,200 300 600 900
$374,000 or more 600 900 1,200 300 600 900
Maximum Credits: $ 600 $ 900 $ 1,200 $ 300 $ 600 $ 900

The Democratic plan also includes $40 billion in federal aid to state and local governments, which will help states balance their budgets without raising taxes on their citizens or cutting important services.

The overall Democratic package, including the state and local aid, short-term corporate tax cuts and long-term curbs on corporate tax shelters, is expected to provide $141 billion in economic stimulus this year and cost a total of $114 billion over ten years (the ten-year cost is less than the 2003 cost mainly because of the effect of the corporate tax reforms in later years). In contrast, the President’s “stimulus” plan is expected to put only about $30 billion into the economy this fiscal year, but cost $674 billion over the upcoming decade (almost $900 billion including added interest on the national debt).

The tax plans were analyzed using the Institute on Taxation and Economic Policy Tax Model.

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