Lawmakers in the House and Senate are now debating legislation to extend temporary tax concessions for capital gains and dividend income. The tax loopholes, enacted in 2003 and scheduled to expire at the end of 2008, allow capital gains and dividend income to be taxed at a top rate of 15 percent—less than half of the 35 percent top tax rate on wages and other income. If these provisions expire, as current law provides, dividends will once again be taxed at the same rates as other income, while the top capital gains tax rate will revert to 20 percent. A new state-by-state analysis by Citizens for Tax Justice shows that the lion's share of the benefits from extending these tax provisions would go to the wealthiest Americans. In particular:I bet you're suprised.
- Nationwide, the richest 1 percent of Americans, with an average income of almost $1.3 million in 2009, would enjoy 53 percent of the tax cuts.
- The average tax cut for this wealthiest group would exceed $12,000 in 2009.
- The vast majority of Americans would receive nothing at all from extending these special tax rates. 78 percent of Americans would get no tax cut, and an additional 10 percent would get less than $100.
- Extending tax breaks for unearned income would also worsen the nation’s fiscal health, increasing federal budget deficits by $31 billion in 2009 alone. If these cuts were made permanent, the long-term cost would be much higher.
Of course, these are "new" tax cuts. We still have scheduled tax cuts that begin to kick in in 2006. Another CTJ report notes:
Since 1991, under a law signed by the first President Bush, the benefits of personal exemptions and most itemized deductions have been gradually phased out for the very wealthiest taxpayers. In 2001, however, the second President Bush succeeded in repealing his father’s reforms. The repeal is scheduled to begin to take effect in 2006, with full repeal in 2010. When and if these two tax changes take effect, their benefits would go almost entirely to the wealthiest Americans.
- In 2006, 97 percent of the tax cuts would go to the wealthiest 1 percent of Americans. The share going to the top 1 percent would rise slightly thereafter.
- More than 99 percent of Americans would receive nothing at all from these new tax cuts in 2006.
- The scheduled cuts would cost $2.6 billion in 2006 if allowed to take effect. The annual cost of these cuts would increase rapidly in later years, and would exceed $10 billion in 2010.