Citizens for Tax Justice

For release on June 20, 1997

NOTE: The Distribution by Income Level of the Plan That Actually Passed the Full Senate Differs From That Shown Here Only Slightly. Check Back for Updated Analysis.

Final Finance Committee Tax Plan Favors Rich Even More

Wealthy are big winners, lower-income groups get nothing

Citizens for Tax Justice has released a detailed distributional analysis of the effects of the tax cut plan approved by the Senate Finance Committee on June 19, 1997. The analysis finds that the final plan is even more tilted toward the well-off than the original plan introduced by Finance Committee Chairman William Roth (R-Del.):

The tax cuts are heavily tilted toward the very best-off taxpayers. Overall, 51% of the proposed tax cuts would go to the top 5% of all taxpayers. The average tax cut for the top 1% of taxpayers would be $15,977 a year. Tax reductions especially targeted to the well-off include the proposed reductions in capital gains taxes, estate taxes and corporate income taxes.
Taxpayers in the bottom 40% of the income scale would receive no benefit from the proposed tax cuts. Instead, they would pay higher taxes, due to increased airline and cigarette taxes.
The plan would cost far more than advertised, with costs growing especially rapidly in years past the "budget window." Although billed as an $85 billion net tax cut over five years, the plan actually will cost close to $60 billion annually (in 1997 dollars) once it is fully effective. As a result, the plan threatens to bust the budget not only in fiscal 2002 but to an ever-increasing extent in later years.

CTJ's analysis of the Finance Committee plan was conducted using the Institute on Taxation and Economic Policy's Microsimulation Tax Model. The ITEP Model, based on a very large sample of tax returns, census data and other data, is similar to the tax models used by the congressional Joint Committee on Taxation and the Treasury Department. The methodological approach used in the ITEP model is very similar to the methodology outlined in the Joint Committee on Taxation's "Methodology and Issues in Measuring Changes in the Distribution of Tax Burdens," 1993. Brief Description of and Comments on the Major Provisions of the Senate Finance 1997 Tax Plan. NOTE: THIS DESCRIBES THE PLAN PRIOR TO THURSDAY NIGHT'S AMENDMENTS. CHECK BACK FOR AN UPDATE.

Average Tax Cuts by Income Level

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