Citizens for Tax Justice , 202-626-3780 June 18, 2001
Post-2001 Tax Cuts Offer Little to Most Americans

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The vast majority of American taxpayers will see the bulk of their Bush tax cuts take effect this year, leaving only a minority of taxpayers with a significant stake in the
Effects of the final Bush tax plan in 2001 & thereafter
Income Group Average tax cut in 2001 Average tax cut still to come 2001 cut as % of fully-phased-in tax cut
Lowest 20% $ –56 $ –10 85%
Second 20% –269 –107 72%
Middle 20% –405 –194 68%
Fourth 20% –575 –449 56%
Next 15% –739 –1,416 34%
Next 4% –1,008 –2,316 30%
Top 1% –3,120 –50,003 6%
ALL $ –440 $ –950 32%
ADDENDUM
Bottom 60% $ –243 $ –104 70%
Top 10% –1,121 –6,771 14%
continued phase-in of the tax cuts after 2001. An analysis of the tax bill's phase-ins released by Citizens for Tax Justice finds that:

  • For taxpayers in the lowest fifth of income earners, 85 percent of the Bush tax cuts will show up on their 2001 tax returns or before.
  • For the second fifth, 72 percent of the Bush tax cuts take effect in 2001.
  • For the middle income group, 68 percent of the Bush tax cuts take effect in 2001.
  • For the fourth quintile, 56 percent of the Bush tax cuts take effect in 2001.

Only the best-off fifth of the population will get most of its tax cut after 2001.

  • Excluding the top one percent, about two-thirds of the tax cuts for the best-off fifth take effect after 2001.
  • For the top one percent, 94 percent of the tax cuts take effect after 2001.

In 2001, seven percent of the total tax cuts go to the top one percent. But after 2001, more than half the remaining tax cuts will go to the top one percent.

"For most Americans, the post-2001 Bush tax cuts offer little gain, but lots of pain," said Robert S. McIntyre, director of Citizens for Tax Justice. "That's because most people will get little more in tax reductions after the first year, while losing large amounts in public services as the remaining upper-income tax cuts are phased in."

(President Bush's March budget submission envisions cutting domestic appropriations by as much as a third as a share of the economy by fiscal 2011.)

Effects of the final version of the Bush tax plan in 2001 only
Income Group Income Range Average Income Income tax cuts ($-bill.) Average income tax cuts % of total 2001 tax cut   2001 cut as % of fully-phased-in tax cuts* Tax cuts still to come** (averages) % of total post-2001 tax cuts
Lowest 20% Less than $15,000 $ 9,300 $ –1.5 $ –56 2.5% 85% $ –10 0.2%
Second 20% $15,000–27,000 20,600 –7.0 –269 12.1% 72% –107 2.2%
Middle 20% $27,000–44,000 34,400 –10.5 –405 18.3% 68% –194 4.1%
Fourth 20% $44,000–72,000 56,400 –15.0 –575 25.9% 56% –449 9.4%
Next 15% $72,000–147,000 97,400 –14.4 –739 25.0% 34% –1,416 22.2%
Next 4% $147,000–373,000 210,000 –5.2 –1,008 9.1% 30% –2,316 9.7%
Top 1% $373,000 or more 1,117,000 –4.1 –3,120 7.0% 6% –50,003 52.2%
ALL $ 57,800 $ –57.7 $ –440 100.0% 32% $ –950 100.0%
ADDENDUM  
Bottom 60% Less than $44,000 $ 21,400 $ –19.0 $ –243 32.9% 70% $ –104 6.5%
Top 10% $104,000 or more 256,000 –14.6 –1,121 25.3% 14% –6,771 70.7%
The table shows the effects of the final version of the Bush tax plan on taxes due on 2001 incomes. Income tax cuts that take effect in 2001 include: reductions in the current 28%, 31%, 36%, and 39.6% rates to 27%, 30%, 35% and 38.6% for income earned after July 1, 2001; a new 10% bracket on the first $12,000 in taxable income for couples, $10,000 for single parents, and $6,000 for childless singles and married persons filing separately; an increase in the per-child credit to $600 (from $500), with expanded rules for refundability of the credit (based on 10% of earned income above $10,000); and an increase in the individual Alternative Minimum Tax exemption, equal to $4,000 for couples and $2,000 for singles.
*Compared to the annual effects of the entire Bush tax plan, fully phased in, at 2001 income levels in 2001 dollars.
**Average annual effects of future tax cuts when fully effective, at 2001 income levels in 2001 dollars.
Source: Institute on Taxation and Economic Policy Tax Model
Citizens for Tax Justice, June 18, 2001

Phase-in dates for the 2001 tax act (calendar years)

This year (2001):
  • New 10% income tax bracket on the first $12,000 in taxable income for couples, $10,000 for single parents and $6,000 for others (no indexing for inflation).
  • Income tax rates of 39.6%, 36%, 31% and 28% each reduced by one percentage point, effective July 1, 2001--in essence, a half point reduction for calendar 2001.
  • Alternative minimum tax exemptions increased by $4,000 for couples and $2,000 for singles.
  • Child credit increased from $500 to $600, with expanded refundability based on 10% of earnings above $10,000 (the $10,000 figure is adjusted in future years for inflation).

2002:

  • Earned-income tax credit phase-out range increased by $1,000 for married couples ($1,000 is not indexed).
  • IRA annual contribution limit increased to $3,000 (from $2,000). Limit on elective deferrals raised from $10,000 to $11,000. Other retirement savings changes take effect. IRA tax credits for lower-income workers established.
  • Top estate tax rate cut from 55% to 50%; recapture of lower rates repealed; estate tax credit converted to an exemption (worth more for larger estates) and exemption increased from $700,000 to $1 million (double those amounts for couples).

2003:

  • Limit on elective retirement savings deferrals raised from $11,000 to $12,000.
  • Maximum expenses for child-care and maid-service credit raised from $2,400 to $3,000 for one child under 13 and from $4,800 to $6,000 for two or more children under 13; maximum credit rate increased from 30% to 35%; credit rate phased down to 20% between $15,001 and $43,001 in income rather than from $10,001 to $28,001.
  • Top estate tax rate cut to 49%

2004:

  • Top four income tax rates cut by an additional percentage point (to 37.6%, 34%, 29% and 27%).
  • Limit on elective retirement savings deferrals raised from $12,000 to $13,000.
  • Top estate tax rate cut to 48%. Exemption increased to $1.5 million (double that for couples).

2005:

  • Child credit increased to $700, with further expansion in refundability, based on 15% of earnings above about $12,000 (the $12,000 figure will be adjusted for inflation in later years).
  • Earned-income tax credit phase-out range increased by an additional $1,000 for married couples ($2,000 total increase is not indexed for inflation).
  • Married standard deduction increased to 174% of the single amount (up from 167%).
  • Starting point for the 26% tax bracket for couples increased to 180% of the single bracket starting point (up from 167% under prior law).
  • IRA annual contribution limit increased to $4,000. Limit on elective deferrals raised to $14,000.
  • Alternative minimum tax exemptions reduced by $4,000 for couples and $2,000 for singles.
  • Top estate tax rate cut to 47%

2006:

  • Top four income tax rates cut to 35%, 33%, 28% and 25%.
  • Starting point for the 25% tax bracket for couples increased to 187% of the single bracket starting point.
  • Married standard deduction increased to 184% of the single amount.
  • Limit on elective retirement savings deferrals raised to $15,000 (indexed thereafter).
  • Current law's phase-out of the personal exemption and disallowance of a portion of itemized deductions at high income levels are reduced by one-third.
  • Top estate tax rate cut to 46%. Exemption increased to $2 million (double that for couples).

2007:

  • Starting point for the 25% tax bracket increased for couples, to 193% of the single bracket starting point.
  • Married standard deduction increased to 187% of the single amount.
  • IRA tax credits for lower-income workers eliminated.
  • Top estate tax rate cut to 45%.

2008:

  • Earned-income tax credit phase-out range increased by an additional $1,000 for married couples ($3,000 total increase is indexed for inflation after 2008).
  • Income amounts for the ten-percent tax bracket increased to $14,000 for couples and $7,000 for childless singles ($10,000 for single parents remains unchanged). Indexed for inflation starting the following year.
  • Married standard deduction increased to 193% of the single amount.
  • Starting point for the 25% tax bracket for couples increased to double the single bracket starting point.
  • IRA annual contribution limit increased to $5,000 (indexed thereafter).
  • Current law's phase-out of the personal exemption and disallowance of a portion of itemized deductions at high income levels are reduced by two-thirds.

2009:

  • Child credit increased to $800.
  • Married standard deduction increased to double of the single amount.
  • Estate tax exemption increased to $3.5 million (double that for couples).

2010:

  • Child credit increased to $1,000 (no indexing for inflation).
  • Current law's phase out of the personal exemption and disallowance of a portion of itemized deductions at high income levels are fully repealed.
  • Estate tax fully repealed (gift tax retained; limited carryover basis starts).
  2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Brackets 10% on $6,000/10,000/12,000, unindexed $7,000/10,000/14,000, indexed thereafter
na in 2000 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%
15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%
28% 27% 27% 27% 26% 26% 25% 25% 25% 25% 25% 25%
31% 30% 30% 30% 29% 29% 28% 28% 28% 28% 28% 28%
36% 35% 35% 35% 34% 34% 33% 33% 33% 33% 33% 33%
39.6% 38.6% 38.6% 38.6% 37.6% 37.6% 35% 35% 35% 35% 35% 35%
Per child credit
(was $500 in 2000) 		$ 600 (unindexed) $ 700 (unindexed) $ 800 $1,000, unindexed
Refundability 10% of earnings > $10,000 (indexed) 15% > about $11,300 (indexed)
Married SD, 01$ 7,600 7,600 7,600 7,600 7,917 8,372 8,509 8,645 9,100 9,100 9,100
Married 15%, 01$ 45,200 45,200 45,200 45,200 48,690 50,584 52,207 54,100 54,100 54,100 54,100
Married EITC, 01$ 32,120 33,095 33,070 33,046 33,878 33,833 33,833 34,624 34,624 34,624 34,624
Nominal $ +1,000 (not indexed) +2,000 (not indexed) +3,000 indexed thereafter
  note: affects both starting & ending points for phase-out      
Depend. care credit to $3000/6000, 35% phase out starts at $15K (up from $2400/4800, 30% and $10K)
AMT exemption   !!!
Couples (+4000) 49,000 49,000 49,000 49,000 45,000 45,000 49,000 49,000 49,000 49,000 49,000
Singles (+2000) 35,750 35,750 35,750 35,750 33,750 33,750 35,750 35,750 35,750 35,750 35,750
Personal exemption phase-out minus 1/3 minus 2/3 repealed
Itemized deduction disallowance minus 1/3 minus 2/3 repealed
Estate Tax Top rate 55% 50% 49% 48% 47% 46% 45% 45% 45% repealed  
Credit (becomes exemption) 1 mill 1 mill 1.5 mill 1.5 mill 2 mill 2 mill 2 mill 3.5 mill repealed  
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