Citizens for Tax Justice

For Release on March 31, 1998

'97 Tax Act Gives Zero to Most Families This April

65 Wealthy Businesspeople & Investors Agree It's Wrong: Will Give Up Their Tax Cuts

The first returns on the 1997 "Taxpayer Relief Act" are coming in, and the results are striking. The vast majority of families will see no tax reduction at all on the tax returns they file this year, while the wealthiest Americans get large cuts.

Only one in 17 of the 80 percent of tax filers making less than $59,000 gets any tax cut at all this April. The average tax cut for these families is only $6.
Less than one in five of the 15 percent of tax filers making $59,000 to $112,000 get a tax cut this April. The average tax cut in this group is only $81.
More than two-thirds of the "taxpayer relief" on this year's returns goes to the best-off one percent of Americans--whose incomes average $666,000.
For the top one percent, the average tax cut is $7,135.

"President Clinton and the GOP-led Congress touted the 1997 tax act as middle-income tax relief, but the reality is far different," noted Robert S. McIntyre, director of Citizens for Tax Justice, which performed the analysis.

Capital Gains Tax Cuts Explain the Skewed Numbers

The only significant tax cut that Congress and the President made effective for tax year 1997--actually retroactive to May 7, 1997--was the reduction in taxes on capital gains income. Under the '97 act, top-bracket taxpayers are allowed to pay about half their regular tax rate on their profits from selling stocks, bonds, etc.--in effect almost a 50% tax exemption for their capital

gains. Less wealthy taxpayers get considerably smaller percentage exemptions for their capital gains, which of course are a much smaller share of their incomes to begin with.

Some Rich Tax-Cut Recipients Rebel!

CTJ's analysis is being released in conjunction with the Responsible Wealth Project of United for a Fair Economy, which will announce its "Tax Break Pledge." To date, some 65 wealthy businesspeople and investors have pledged to give away their tax cuts to protest the '97 act's skewed priorities. The first 14 of these "capital gainers with a conscience" to complete their tax returns have pledged more than $425,000. See the attached "Responsible Wealth's Tax Break Pledge" for more details.

Capital Gains Exemptions After the 1997 Tax Act
Regular Top Tax Rate	Average AGI	% of All Filers	% of All Cap. Gains	Cap. Gains /AGI	% of CG Tax Breaks	% of Gains Exempt
-	$3,594	25.2%	4.0%	8.7%	-	nm
15%	27,926	50.5%	7.6%	1.1%	2.4%	33%
28%	70,168	20.1%	13.3%	1.9%	8.0%	29%
31%	131,844	2.6%	9.9%	5.7%	7.1%	35%
36%	238,015	1.0%	13.6%	10.7%	12.6%	44%
39.6%	873,585	0.6%	51.5%	19.1%	69.8%	49%

Future years' tax cuts will remain tilted toward wealthy

Of course, some provisions of the 1997 tax act that take effect in later years, such as the per-child tax credit, will benefit many middle-income families. But there also are future tax cuts targeted to the wealthy and tax hikes that will hit low- and moderate-income people the hardest. Thus, even when fully phased in, more than three-fourths of the total tax cuts enacted in 1997 will go to the top fifth of all taxpayers, and almost half will go to the top 5%.

CTJ's analysis of the fully-phased-in effects of the 1997 tax act, published last year, found that the average annual tax cut from the '97 tax act for the best-off one percent will be $16,157, while the average cut for the middle 20% of all families will be only $153. The bottom 20% of all taxpayers will actually pay higher taxes (due to increased excise taxes), and the second 20% will net nothing.

Effects of the 1997 Taxpayer Relief Act on 1997 Tax Returns
Income Group	Income Range	Average Income	% with tax cut	Average Tax Cut	% of Total Cut
Lowest 20%	Less than $13,000	$8,050	0.9%	$-0	0.1%
Second 20%	$13,000-$23,000	17,500	3.0%	-2	0.3%
Middle 20%	$23,000-36,000	28,500	7.4%	-5	0.9%
Fourth 20%	$36,000-59,000	46,100	11.8%	-17	3.1%
Next 15%	$59,000-112,000	77,200	18.5%	-81	11.1%
Next 4%	$112,000-246,000	150,800	37.4%	-454	16.7%
Top 1%	$246,000 or more	666,000	57.5%	-7,135	67.9%
ALL		$44,600	9.5%	-111	100.0%
Addendum:Bottom 80%	Less Than $59,000	$25,100	5.8%	-6	4.4%

Citizens for Tax Justice is a non-partisan tax research group based in Washington, DC.

Responsible Wealth, a project of Boston-based United for a Fair Economy, is a network of businesspeople, investors and other affluent Americans concerned about the damaging effects of growing inequality on our society and our democracy.

Responsible Wealth's Tax Break Pledge

Capital gainers with a conscience are giving away their tax cut.

Why a Tax Break Pledge?

The 1997 Tax Act reduced the top tax rate on long-term capital gains from 28% to 20%.

This means an estimated $87 billion in capital gains tax cuts over 5 years, according to Citizens for Tax Justice.
81% of this give-back will go to the richest 5% of Americans.
Less than 2% of the capital gains tax cut will benefit the bottom 60%.
In its first year, this tax cut will give the wealthiest one percent of families an average tax cut of $7,135 each. This group's tax cuts will be much larger in later years.
In contrast, the lowest-income fifth of Americans will get no benefit.

At a time of growing economic inequality, budget cuts in public services, high taxes for the working poor and national crises in health care and education, why give more money to those who already have enough?

How Does the Tax Break Pledge Work?

The Tax Break Pledge is a way for concerned capital gainers to publicly oppose this tax cut targeted at the wealthy. They are counteracting Congress's misplaced priorities with their money as well as their words.

Pledgers calculate their taxes under the 1996 and 1997 rules and give some or all of the difference away. Some are donating it to charities of their choice, and some are returning the money to the US Treasury. Others are donating it to the newly created Fund for Tax Fairness (FTF), administered by the Funding Exchange (an umbrella group of community foundations), which will donate all the funds to non-profit organizations working for more even-handed tax policies.

Who is Taking the Pledge?

To date, 65 people have taken the Tax Break Pledge, with more pledging each day.

Over $425,000 has been pledged so far by the 14 people who have completed their tax forms and so know their tax cut amounts.

Two examples of tax pledgers and their reasons for taking the pledge:

Michele McGeoy of California sold her software company in 1993 and now heads a non-profit that provides technology and training to high-school students. McGeoy estimates that she gained about $1,300 from this tax break. She's taken the Tax Break Pledge and will give that amount to the Fund for Tax Fairness. According to McGeoy:

"It's always great to have more money. But at a certain point you have to ask yourself what it means in a country founded on a notion of equal opportunity to have the government favoring some of us over others. These tax breaks are wrong. I want to speak with my dollars. I think many others will join me."

Charles Demeré is a 69-year-old Episcopal priest in Maryland and an inheritor. He estimates that he saved $5,000 from the 1997 Tax Act. And he's planning to give all of it to the Fund for Tax Fairness. For Mr. Demeré, this is a moral question:

"While this tax break benefits me as a person of wealth, I am convinced that it is not good for us or our grandchildren. If the gap gets too great, our society may erupt and revolt, the economy may crumble.. The rising tide of prosperity is lifting primarily the yachts; God wants the rowboats lifted as well. I have sent a letter to 140 people asking them to join me in the Tax Break Pledge."

Responsible Wealth, founded in 1997, is a network of business people, investors and other affluent Americans who challenge the "rules of the game" which let them keep winning at others' expense. They are concerned about the damaging effects of growing inequality on our society and our democracy.

Responsible Wealth is a project of United for a Fair Economy, a national group founded in 1994 to focus public attention and action on economic inequality in the United States.

The Tax Break Pledge will be publicly announced at a March 31 press conference at 11 a.m. in Room 2226 of the Rayburn House Office Building, Washington, DC, at which Citizens for Tax Justice will release a study on the effects of the capital gains tax cut. Several Congress members who voted against the 1997 Tax Act will speak: Representatives David R. Obey (D-WI), Robert T. Matsui (D-CA), Peter A. DeFazio (D-OR), and Fortney "Pete" Stark (D-CA). Pledgers will speak about their reasons for taking their unusual stand.

For more information, or to arrange an interview with a tax pledger, please contact Betsy Leondar-Wright at United for a Fair Economy, (617) 423-2148 x13.

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