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Citizens for Tax JusticeAugust 6, 1997 |
Under the tax plan just agreed to by Congress and the President, average tax
cuts for middle-income taxpayers making between $20,000 and $75,000 will range
from a low of $295 a year in Florida to a high of $589 a year in Utah. In only two
states, Utah and Alaska ($522) will the average middle-income tax cut exceed the
$498 a year average reduction in government services that the tax cuts will require.
Nationally, almost half the total tax cuts will go to high-income taxpayers making more than $100,000 a year. In the twelve jurisdictions where the tax cuts are most tilted toward the wealthy, as much as two-thirds of the tax cuts will go to those making in excess of $100,000.
These are among the results of a new state-by-state analysis of the 1997 tax legislation by Citizens for Tax Justice, using the Institute on Taxation and Economic Policy's Microsimulation Tax Model.
"It has been widely pointed out that the loophole-ridden 1997 tax plan is designed by and for the wealthy and the special interests," noted CTJ director Robert S. McIntyre. "Our new analysis allows ordinary taxpayers to compare themselves to other people in their own states and to residents of other states."
Upper-Income Tax Breaks Dominate Tax Cut Agreement
Nationwide, just under half the total tax cuts provided by the new tax act will go to the best-off six percent of all taxpayers, those making more than $100,000 annually. In 12 jurisdictions, more than half the tax cuts are targeted to those making more than $100,000. These include: Washington, D.C. (71%), Nevada (66%), Florida (62%), Connecticut (61%), Massachusetts (58%), New York (57%), New Jersey (54%), Illinois (52%), California (52%), Colorado (51%), Wyoming (51%) and New Hampshire (51%). In each of these jurisdictions, most of these high-income tax cuts go to those making more than $200,000.
The act's high-income tax cuts primarily reflect sharp reductions in taxes on capital gains and large estates, a new form of tax-exempt investment income, and a variety of new or expanded corporate tax loopholes.
States with the Biggest and Smallest Middle-Income Tax Cuts
Besides Utah and Alaska, the top ten states for middle-income tax cuts under the act include: Idaho, North Dakota, Wyoming, Montana, Wisconsin, New Mexico, Oregon and South Dakota. In general, middle-income taxpayers in these states do better than the national average because they have more children.
Beside Florida, the ten jurisdictions with the lowest average middle-income tax reductions under the 1997 tax bill include: the District of Columbia, Massachusetts, Ohio, Arkansas, Kentucky, Delaware, North Carolina, Connecticut and New Jersey. Middle-income taxpayers in these states have relative few children compared to the national average.
States with the Largest & Smallest Average Tax Cuts Overall
A rather different picture emerges when one looks at the average tax cuts for all taxpayers in each state. This difference reflects the fact that almost half the tax cuts, in particular, capital gains and estate tax reductions, are reserved for the best-off 6 percent of all taxpayers, with most of that going to the top 1 percent.
In general, the average overall tax cut in each state for all taxpayers depends primarily on the percentage of taxpayers in a state making more than $200,000 a year (1.5% of all taxpayers nationally).
Thus, the three jurisdictions with the largest overall average tax cuts, Nevada, Washington, D.C. and Connecticut, rank 8th, 2nd and 1st, respectively in the percentage of their taxpayers making more than $200,000 a year. In contrast, the four states with the lowest overall average tax cuts, West Virginia, Kentucky, Arkansas and Mississippi, rank 51st, 46th, 49th and 48th in the percentage of their taxpayers making more than $200,000.
Tax Increases on Low- and Moderate Income Families
Besides its tax-reduction measures, the 1997 tax act also includes a number of
tax increases, primarily excise taxes on airline tickets and cigarettes. For taxpayers
making less than $20,000 a year, these excise tax hikes will on average outweigh
any modest income tax cuts. The overall net tax increases on taxpayers making less
than $20,000 are highest in Kentucky and Michigan, and lowest in Mississippi and
Utah.
Tax Act Betrays President's "Principles"
"Just a few weeks ago, President Clinton attacked the congressional tax plans as
unfair and fiscally irresponsible, and promised he would never sign such a bill," noted
McIntyre. "But unfortunately, the final deal violates both those principles: it gives half
of its tax cuts to the richest six percent of Americans and will explode in cost in future
years. As a result, it undermines tax fairness and guarantees larger budget deficits in
the future."
A table summarizing the findings of CTJ's state-by-state analysis of the tax act is at end of document. More state-by-state details (17 pages) are available upon request.
Methodological Notes: Taxpaying units (couples and individuals) are grouped by total cash income. The provisions of the tax plan generally were analyzed using the Institute on Taxation & Economic Policy Microsimulation Tax Model. Estimates for proposed estate tax reductions are based on Joint Committee on Taxation, "Methodology and Issues in Measuring Changes in the Distribution of Tax Burdens," 1993. Estimates for the education tax credits and savings accounts (ESAs) are estimates based on the proposed statutory rules, distribution of college-age children, college attendance rates, etc. Child credits and education tax credits are shown as the average amounts over the next five years, at 1997 levels. All other provisions are shown fully effective at 1997 levels. Citizens for Tax Justice is a non-partisan tax research group based in Washington, DC.
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Average Tax Changes Under the 1997 Tax Act Approved by Congress By State and Income of Taxpaying Unit, at 1997 Income Levels |
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| State | <$10 | $10-20 | $20-30 | $30-40 | $40-50 | $50-75 | $75-100 | $100-200 | $200+ | All |
| Alabama | $ +42 | $ +10 | $ –106 | $ –247 | $ –395 | $ –727 | $ –1,127 | $ –1,632 | $ –11,205 | $ –387 |
| Alaska | +38 | +40 | –218 | –274 | –638 | –821 | –1,196 | –1,594 | –6,668 | –542 |
| Arizona | +34 | +11 | –132 | –234 | –440 | –752 | –1,213 | –1,674 | –11,224 | –522 |
| Arkansas | +43 | +18 | –102 | –260 | –419 | –716 | –1,116 | –1,809 | –13,234 | –348 |
| California | +32 | +20 | –124 | –261 | –399 | –746 | –1,142 | –1,539 | –11,211 | –555 |
| Colorado | +38 | +20 | –103 | –252 | –419 | –785 | –1,177 | –1,859 | –11,834 | –570 |
| Connecticut | +30 | +22 | –101 | –158 | –339 | –709 | –1,181 | –1,477 | –11,918 | –709 |
| Delaware | +45 | +34 | –63 | –217 | –382 | –731 | –1,128 | –1,576 | –10,156 | –498 |
| Dist. of Col. | +23 | +16 | –128 | –337 | –204 | –594 | –879 | –1,487 | –17,589 | –747 |
| Florida | +41 | +26 | –81 | –211 | –360 | –674 | –1,166 | –1,847 | –15,770 | –519 |
| Georgia | +40 | +26 | –149 | –244 | –444 | –726 | –1,127 | –1,508 | –11,234 | –466 |
| Hawaii | +28 | +22 | –127 | –316 | –475 | –777 | –1,191 | –1,777 | –8,296 | –472 |
| Idaho | +35 | +13 | –98 | –464 | –580 | –936 | –1,409 | –1,945 | –11,112 | –534 |
| Illinois | +37 | +25 | –92 | –228 | –383 | –739 | –1,205 | –1,543 | –12,105 | –577 |
| Indiana | +42 | +34 | –89 | –245 | –429 | –813 | –1,138 | –1,525 | –9,391 | –449 |
| Iowa | +38 | +36 | –68 | –263 | –535 | –879 | –1,324 | –1,617 | –9,076 | –415 |
| Kansas | +36 | +22 | –118 | –302 | –483 | –802 | –1,212 | –1,589 | –9,284 | –474 |
| Kentucky | +47 | +46 | –61 | –283 | –416 | –754 | –1,158 | –1,644 | –9,375 | –329 |
| Louisiana | +42 | +24 | –123 | –281 | –513 | –761 | –1,217 | –1,675 | –8,685 | –386 |
| Maine | +18 | +22 | –137 | –273 | –473 | –794 | –1,288 | –1,929 | –11,218 | –398 |
| Maryland | +34 | +17 | –92 | –268 | –352 | –718 | –1,119 | –1,490 | –10,034 | –565 |
| Massachusetts | +37 | +23 | –46 | –202 | –340 | –750 | –1,214 | –1,581 | –14,012 | –605 |
| Michigan | +48 | +42 | –78 | –235 | –366 | –714 | –1,129 | –1,474 | –11,420 | –513 |
| Minnesota | +41 | +34 | –62 | –249 | –449 | –821 | –1,225 | –1,577 | –9,817 | –503 |
| Mississippi | +38 | –8 | –120 | –291 | –478 | –808 | –1,114 | –2,038 | –11,919 | –356 |
| Missouri | +44 | +25 | –82 | –274 | –452 | –777 | –1,202 | –1,554 | –10,635 | –425 |
| Montana | +33 | +35 | –102 | –437 | –637 | –851 | –1,367 | –2,214 | –11,858 | –427 |
| Nebraska | +36 | +16 | –87 | –252 | –510 | –890 | –1,310 | –1,706 | –9,746 | –436 |
| Nevada | +44 | +27 | –83 | –264 | –394 | –733 | –1,103 | –1,849 | –24,300 | –768 |
| New Hampshire | +42 | +35 | –61 | –247 | –402 | –791 | –1,259 | –1,638 | –14,892 | –623 |
| New Jersey | +34 | +16 | –64 | –200 | –361 | –721 | –1,093 | –1,392 | –9,353 | –604 |
| New Mexico | +34 | +12 | –168 | –336 | –545 | –807 | –1,238 | –1,719 | –10,245 | –445 |
| New York | +34 | +28 | –95 | –244 | –392 | –719 | –1,091 | –1,448 | –12,570 | –537 |
| North Carolina | +34 | +17 | –142 | –217 | –398 | –709 | –1,155 | –1,665 | –12,301 | –437 |
| North Dakota | +39 | +12 | –88 | –385 | –610 | –908 | –1,360 | –1,755 | –6,358 | –404 |
| Ohio | +38 | +30 | –53 | –238 | –407 | –733 | –1,154 | –1,602 | –9,627 | –390 |
| Oklahoma | +38 | +22 | –140 | –356 | –419 | –730 | –1,128 | –1,612 | –9,394 | –362 |
| Oregon | +43 | +34 | –163 | –319 | –495 | –801 | –1,296 | –2,026 | –11,112 | –538 |
| Pennsylvania | +35 | +36 | –79 | –252 | –408 | –754 | –1,144 | –1,552 | –11,280 | –453 |
| Rhode Island | +30 | +15 | –108 | –256 | –390 | –809 | –1,180 | –1,633 | –10,302 | –472 |
| South Carolina | +37 | +13 | –144 | –256 | –405 | –727 | –1,150 | –1,626 | –11,698 | –389 |
| South Dakota | +40 | +35 | –119 | –340 | –532 | –889 | –1,378 | –1,922 | –15,966 | –460 |
| Tennessee | +42 | +36 | –135 | –225 | –420 | –707 | –1,160 | –1,505 | –12,654 | –417 |
| Texas | +38 | +21 | –153 | –326 | –455 | –766 | –1,143 | –1,508 | –10,765 | –484 |
| Utah | +28 | +11 | –169 | –412 | –744 | –1,094 | –1,480 | –1,995 | –10,109 | –648 |
| Vermont | +41 | +30 | –75 | –382 | –407 | –897 | –1,289 | –1,989 | –13,026 | –466 |
| Virginia | +38 | +26 | –109 | –263 | –388 | –726 | –1,141 | –1,428 | –9,214 | –478 |
| Washington | +40 | +33 | –119 | –232 | –485 | –789 | –1,217 | –1,878 | –13,331 | –570 |
| West Virginia | +41 | +37 | –79 | –246 | –432 | –721 | –1,326 | –1,749 | –7,677 | –285 |
| Wisconsin | +35 | +32 | –72 | –286 | –523 | –814 | –1,286 | –1,697 | –11,030 | –503 |
| Wyoming | +39 | +3 | –75 | –386 | –400 | –962 | –1,345 | –2,220 | –23,011 | –665 |
| US Totals | $ +38 | $ +25 | $ –103 | $ –256 | $ –420 | $ –752 | $ –1,164 | $ –1,581 | $ –11,594 | $ –498 |
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