WASHINGTON, D.C. – The share of total federal income taxes paid by the top 1 percent of tax filers increased to 39.89 percent in 2006, while the tax share of the top 5 percent climbed to 60.14 percent.  The income tax share of the top half rose to 97.01 percent, according to recent Internal Revenue Service (IRS) data.  The tax shares are the highest on record for these groups based on comparable IRS data going back to 1986. 

MORE>>>

Most taxpayers know that tax burdens often differ between families with the same income.  This can be due to family size, filing status, whether a family itemizes their deductions or takes the standard deduction, whether a family rents or deducts home mortgage interest payments, the source of a family’s income and many other factors.  Additionally, some families are more aggressive at reducing their tax liabilities than others.  For example, this can be done legally by contributing to a 401(k) plan, an individual retirement account or a medical savings account, and in many other ways as well. However, this variability is not the picture portrayed in tax distribution tables, which usually group taxpayers solely by income without consideration of economic or demographic factors

MORE>>>

WASHINGTON, D.C. -- Mutual fund shareholders’ taxes on long-term capital gain distributions increased to $16.7 billion in tax year 2007, according to a new study by respected research firm Lipper Inc.  As the Lipper study notes, “Considering most mutual fund investors reinvest their distributions back into the funds, that is a large price to pay for a buy-and-hold strategy!!!”  The study, Taxes in the Mutual Fund Industry—2008, estimates that mutual fund shareholders’ taxable and nontaxable long-term capital gains increased from $233.8 billion in 2006 to $334.0 billion in 2007.  

MORE>>>

WASHINGTON, D.C. -- The prospect of a huge future tax increase will undermine economic decisions made in today’s fragile economic environment as well as in coming years, Congressman Jim Saxton, ranking Republican member of the Joint Economic Committee said today.  The evidence shows that large tax increases, as embodied in the Congressional budget resolutions, will severely damage the economy. 

MORE>>>

WASHINGTON, D.C. - The share of federal income taxes paid by the top 1 percent of households ranked by income increased from 36.5 percent in 2000 to 38.8 percent in 2005, recent Congressional Budget Office (CBO) data show.  Their share of total federal taxes increased from 25.5 percent in 2000 to 27.6 percent in 2005, the last year for which data are available.   

MORE>>>

WASHINGTON, D.C. – Recently released Congressional Budget Office (CBO) data show that the total effective federal tax rate of the middle fifth of households declined after 2001 to its lowest levels since at least 1979, Congressman Jim Saxton, ranking member of the Joint Economic Committee, said today.  Under the 2001 and 2003 tax relief legislation, the income tax as a share of income for the middle fifth also has fallen to its lowest levels in decades.

MORE>>>

Tax policy should work with monetary policy to prevent or cushion the adverse effects of a recession on the U.S. economy.  Dollar-for-dollar, one of the most cost-effective ways to stimulate economic growth through tax policy would be to accelerate the depreciation deductions for business investment.

MORE>>>

WASHINGTON, D.C. – Despite strong economic growth in recent quarters, the downside risks to the economic outlook are growing, a situation aggravated by plans for a variety of tax increases.  This morning, Republican Leader John Boehner and other Republican leaders issued a new report highlighting the danger tax increases would pose to the economy

MORE>>>

Federal policymakers have recently floated a number of proposals to levy new taxes or to increase existing taxes.  These include:

• higher individual income tax rates,
• higher tax rates on capital gains and dividends,
• an income tax surcharge on upper income households,
• removal of the earnings cap on payroll taxes for OASDI benefits (i.e., Social Security pensions),
• eliminating the tax treatment of carried interests as capital gains,
• higher motor vehicle fuel taxes, and
• a new tax on the carbon content of energy.

However, these tax proposals are not paired with significant spending reductions.  Instead, many are combined with plans for new spending.  It is doubtful whether these proposals should be considered as deficit reduction measures

MORE>>>

This report examines the recent controversy about the taxation of the carried interests of general partners in hedge funds and private equity funds.

Some policymakers have contended that the general partners in hedge funds and private equity funds are unfairly using certain provisions of the federal tax code and related Internal Revenue Service (IRS) regulations and interpretations to defer recognition of and lower the effective tax rate on the compensation paid to general partners from these funds.  This occurs because some of the compensation comes from long-term capital gains. 

However, these carried interest tax provisions encourage entrepreneurship by facilitating the pooling of capital and highly skilled labor in partnerships.  Any tax code change designed to repeal these tax provisions may inadvertently damage small business formation, hamper the restructuring of ailing corporations, and slow economic growth.

MORE>>>

WASHINGTON, D.C. – The share of total federal income taxes paid by the top one percent of tax filers increased to 39.38 percent in 2005, while the tax share of the top 5 percent climbed to 59.67 percent. The income tax share of the top half rose to 96.93 percent, according to recent Internal Revenue Service (IRS) data. The tax shares are the highest on record for these groups in comparable IRS data going back to 1986.

MORE>>>
Download IRS Data in PDF format

Tax distribution tables are promoted by much of the media and often have a negative impact on tax policy.  However, these distribution tables typically hide important information and distort the impact of tax relief legislation for most taxpayers.

MORE>>>

WASHINGTON, D.C. – New evidence indicates that each dollar of tax increases since 1947 has led to $1.07 in additional federal spending, according to a study released today by Congressman Jim Saxton, ranking Republican member of the Joint Economic Committee (JEC).

MORE>>>
Download Research Report in PDF format
Download Study in PDF format

WASHINGTON, D.C. - A primary objection to reducing or eliminating the federal estate tax is the projected revenue loss.  Although the $28 billion that the estate tax is expected to raise in 2006 is hardly insignificant, it represents just 1.2 percent of total receipts.  However, the actual revenue yield of the estate tax is considerably lower.  There is abundant evidence that the high compliance costs and reduced capital accumulation associated with the tax result in at least partially offsetting revenue losses to the income tax.

MORE>>>

WASHINGTON, D.C. - Debate over changes in the tax code often focuses on who benefits most from such changes. Most of this debate hinges on tax distribution tables that measure the impact of tax law changes on the tax liabilities of various income groups. However, many newspaper articles and think tank reports fail to consider the current progressivity of the existing tax code when discussing the benefits of tax cuts for various income groups.

MORE>>>

WASHINGTON, D.C. - In recent years, the U.S. macroeconomy has staged a remarkable recovery from earlier sluggishness, due in part to numerous headwinds or macroeconomic supply-side shocks affecting the economy. Recent GDP growth, for example, has been persistent and robust, trending well above 3 percent.

MORE>>>

WASHINGTON, D.C. - The Federal estate tax undermines economic growth, fails to reduce inequality, and harms many small businesses, according to a new study released today by Joint Economic Committee (JEC) Chairman Jim Saxton and fellow Committee members Congressman Phil English and Congressman Kevin Brady. The study, Costs and Consequences of the Federal Estate Tax, offers a wide-ranging examination of the central issues regarding the estate tax and its potential reform.

MORE>>>
Download Study in PDF format

WASHINGTON, D.C. - The existing U.S. corporate tax laws have grown into a patchwork of overly complex, inefficient and unfair provisions that impose large costs on corporate business. U.S. corporations seeking to minimize the costs imposed by the counterproductive provisions in the U.S. corporate tax system have adopted strategies to reduce overall tax exposure and increase profits. Such strategies include moving operations overseas, corporate inversions, transfer pricing, earnings stripping, and complex leasing arrangements, all to minimize taxation.

MORE>>>

WASHINGTON, D.C. - The U.S. corporate income tax is overly complex and counterproductive, according to a new Joint Economic Committee (JEC) study released today by Chairman Jim Saxton. The new study, Reforming the U.S. Corporate Tax System to Increase Tax Competitiveness, identifies several different ways the tax could be improved. These options include territorial taxation, individual and corporate income tax integration, movement toward consumption taxation, and elimination of the corporate alternative minimum tax or the corporate income tax altogether.

MORE>>>

WASHINGTON, D.C. - The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) was designed to encourage balanced economic growth. In addition to stimulating consumer spending and short-term economic growth, the JGTRRA was intended to promote investment, capital formation and long-term growth. The efficacy of the JGTRRA has been the subject of debate in recent policy disputes and in academic and popular publications. Many of the criticisms have questioned the adequacy of the economic stimulus to increase consumer spending. The key issue, however, is whether the JGTRRA stimulated investment.

MORE>>>

WASHINGTON, D.C. - Economic theory gives policymakers solid support for resisting tax increases and preferring spending reductions as a method of reducing the federal deficit.

MORE>>>

WASHINGTON, D.C. - A regular feature of the debate over changes in the tax code is who benefits and who doesn't. Most of this debate hinges on federal government statistical tables, which employ distributional analysis to measure the effects of changes in the tax code.

MORE>>>

WASHINGTON, D.C. - The tax relief enacted since 2001 has pushed after-tax median income for married-couple families with two children to historic highs, according to a new Joint Economic Committee study released today by Vice Chairman Jim Saxton. The new study, Family Income and Income Taxes During the Economic Recovery, examines the impact of the 10 percent tax bracket, expanded child credit, and marriage penalty relief on the after-tax income of such families between 2001 and 2003.

MORE>>>
Download Study in PDF format

WASHINGTON, D.C. - The federal tax cuts of the last few years have put the United States near or at the top among advanced large economies in offering incentives to work, save, and invest, according to a new Joint Economic Committee (JEC) study released by Vice Chairman Jim Saxton.

The new study, How Competitive Is the U.S. Tax System?, compares major tax rates in 2003 in the United States versus those in the world's eight other largest advanced economies: Australia, Canada, France, Germany, Italy, Japan, Spain, and the United Kingdom.

MORE>>>
Download Study in PDF format

WASHINGTON, D.C. - Taxes, not fees and expenses, remain the biggest cost to mutual fund shareholders, according to a new study released today by Vice Chairman Jim Saxton. A most serious tax impact comes from how income taxes on capital gain distributions significantly reduce investment returns, according to the new JEC study, Providing Tax Equity for Mutual Fund Investors: Changing the Tax Treatment of Capital Gain Distributions. This tax liability occurs when mutual funds realize capital gains that then must be passed on to mutual fund shareholders, even if the investors sold none of their mutual fund shares.

MORE>>>
Download Study in PDF format

WASHINGTON, D.C. - The tax relief legislation passed in recent years has provided thousands of dollars in tax savings to typical families and should not be tampered with, Vice Chairman Jim Saxton said today in releasing a new study on the topic. The study, Income Tax Savings for Middle-Income Families, focuses on the impact of recent tax changes on four person, married couple families.

MORE>>>
Download Study in PDF format

WASHINGTON, D.C. - Tax distribution tables are often incomplete, biased and misleading and thus should not drive U.S. tax policy, according to a new Joint Economic Committee study released today by Vice Chairman Jim Saxton. The new study, A Comparison of Tax Distribution Tables: How Missing or Incomplete Information Distorts Perspectives, is the latest product of a JEC research program on tax distribution issues. Tax distribution tables are typically used to project and allot changes in taxation to specific income groups, but often omit basic information such as the share of taxes paid by such groups before and after a given tax measure takes effect.

MORE>>>
Download Study in PDF format

WASHINGTON, D.C. - The top half of taxpayers continue to pay over 96 percent of Federal income taxes, while the bottom half accounts for slightly less than 4 percent, according to new 2001 Internal Revenue Service (IRS) data released today by Vice Chairman Jim Saxton. The impact of the stock market collapse that began in 2000, and the economic slowdown and recession that followed, are clearly visible in the data, especially for the income and tax shares of upper income taxpayers.

MORE>>>
Download Data in PDF format

WASHINGTON, D.C. - Comparisons of the effects of tax legislation on taxpayers in various income groups often misrepresent the impact of the tax system on most taxpayers, according to a Joint Economic Committee (JEC) study released today by Vice Chairman Jim Saxton. According to the study, The Misleading Effects of Averages in Tax Distribution Analysis, such comparisons are often misleading because the average tax liabilities commonly used are very different from the income tax liabilities actually borne by most taxpayers in each income group. The study is a statistical analysis of Internal Revenue Service income tax data from its Statistics of Income division.

MORE>>>

WASHINGTON, D.C. - The positive effects of repealing the estate tax should be made permanent, Vice Chairman Jim Saxton said today in releasing a new study on this tax with Rep. Jennifer Dunn. The study, The Economics of the Estate Tax: An Update, documents the damage inflicted by the estate tax on capital formation, thrift, continuity of small businesses, and the environment. Under current law, the damaging effects of the estate tax are reduced, and the tax would be repealed in 2010, only to come back to 2001 levels in the next year.

MORE>>>
Download Study in PDF format

WASHINGTON, D.C. - The new tax legislation recently reported by the House Ways and Means Committee would improve economic growth by addressing a major soft spot in the economic expansion - investment - according to a study released today by Joint Economic Committee (JEC) Vice Chairman Jim Saxton. The study, Near-Term Stimulus and Long-Term Economic Growth, analyzes the economic impact of the Jobs and Growth Tax Reconciliation Act of 2003.

MORE>>>
Download Study in PDF format

WASHINGTON, D.C. - The federal budget deficit is a manageable problem and should not preclude pro-growth tax relief, Joint Economic Committee (JEC) Vice Chairman Jim Saxton said today. He made his remarks in connection with the release of a new JEC study, Deficits, Taxation, and Spending.

MORE>>>
Download Study in PDF format

WASHINGTON, D.C. - The tax relief plan proposed by President Bush would reduce the excessive burden of taxation on the U.S. economy, according to a new JEC study released by Vice Chairman Jim Saxton today. The study examines the extra costs imposed by current levels of taxation, which average about 40 cents on the incremental dollar collected in federal revenue. The study, Federal Tax Policy, Near-Term Stimulus, and Long-Term Growth, analyzes the main components of the Administration plan.

MORE>>>
Download Study in PDF format

WASHINGTON, D.C. - New Internal Revenue Service (IRS) data show that the top one percent of tax filers paid 37.42 percent of federal personal income taxes in 2000, the latest year for which data are available, Chairman Jim Saxton said today. The 2000 share paid by the top one percent (ranked by adjusted gross income) reflects an increase from the 36.18 percent level posted in 1999. The 3.91 percent share paid by the bottom half of taxpayers was virtually unchanged during this period, as was the 96.09 percent share borne by the top half. The new data provide the necessary context in which to evaluate claims about the supposed distributional impact of various tax policy proposals.

MORE>>>
Download Data in PFD format

WASHINGTON, D.C. - For many senior citizens, individual retirement plans, such as IRAs and 401(k)s, are a primary saving vehicle for retirement. Along with Social Security, individual retirement plans (“IRPs”) represent a major source of money for retirement. However, even though IRPs are a valuable saving vehicle for many seniors, many IRPs have one major drawback: the forced distribution of assets and the associated taxation of those assets for senior citizens at age 70½ for traditional IRAs and the later of age 70½ or the year in which the account holder retires for 401(k)s. This requirement forces many seniors to take distributions when they do not need them Worse, in cases of a down market, the forced distributions may require seniors to sell assets at depressed prices to pay taxes, even if investment losses have been incurred.

This study addresses the minimum distribution requirement that effectively forces senior citizens to withdraw funds from IRPs or face a 50 percent excise tax, the reasoning behind the requirement, and the economic harm it can have on seniors, and some policy alternatives to this requirement that would help mitigate the bias against seniors and their retirement that this requirement creates.

MORE>>>

WASHINGTON, D.C. - Investment is widely recognized as a key to long-term economic growth. Marginal individual income tax rate reductions clearly stimulate aggregate consumption and labor force participation, but their stimulative effects on aggregate investment have been disputed. Based on the empirical evidence available a decade and a half ago, marginal individual income tax reductions were thought to have slight and indirect effects on aggregate investment. Even marginal corporate income tax rate reductions were thought to boost aggregate investment only modestly. To stimulate aggregate investment, many economists recommended asset-specific tax relief such as accelerated depreciation, investment tax credits, and lower differential tax rates on the income from specific capital assets. But, empirical progress in aggregate investment modeling during the last decade and a half suggests that marginal income tax rate reductions is more effective than previously thought in stimulating aggregate investment.

MORE>>>

WASHINGTON, D.C. - In the Federal budget process, the pay-as-you-go (PAYGO) principle as set forth in the Budget Enforcement Act (BEA) requires that all enacted direct spending and tax legislation for a fiscal year must be deficit-neutral in the aggregate. PAYGO rules have been generally praised by proponents for restraining new spending and for encouraging legislators to provide reasons for their budget decisions. Opponents have pointed to unconstrained federal spending, and frequent budget artifices as examples of the failure of PAYGO. In addition, the PAYGO rules raise excessive procedural hurdles for tax relief legislation. Numerous scholars and practitioners in the field have addressed the pros and cons of PAYGO, including the need for changing PAYGO rules or eliminating them altogether. The current PAYGO provisions are set to expire with the BEA after fiscal year 2002.

This paper concludes that if the PAYGO requirements as set forth in the Budget Enforcement Act are to be extended, then at a minimum a compromise approach be adopted to reform PAYGO: to permit dynamic revenue analysis of tax legislation, or at the very least allow legislation providing appropriate tax deferrals (such as contributions to IRAs) to be exempt from PAYGO requirements. This paper discusses budget enforcement and the PAYGO concept, then identifies the problems associated with PAYGO and how PAYGO often leads to counterproductive tax policy decisions. The paper also reviews the mixed success of PAYGO in controlling federal spending. The paper then demonstrates how a reform that would allow legislation providing appropriate tax deferral to be exempt from PAYGO rules would allow both fiscal responsibility and good tax policy by promoting incentives for taxpayers to save and invest, and potentially increasing revenue to the government.

MORE>>>

WASHINGTON, D.C. - The permanency of the federal tax code is an issue currently before Congress. President George W. Bush is seeking to accelerate the implementation of the individual income tax rate reductions in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and to make all of its provisions, including the rate reductions, the expansion of the child tax credit, and the repeal of the estate tax, which are currently scheduled to expire on December 31, 2010, permanent.

According to the available evidence, individuals respond more strongly to a permanent federal tax rate reduction or other permanent tax incentives than to a temporary federal tax reduction or a federal tax rebate. Thus, the duration of a federal tax reduction affects how much it can stimulate economic growth.

MORE>>>

Over the last 30 years, the mutual fund industry has grown tremendously to its current size of almost $7 trillion in funds managed. It has been characterized by rapid innovation and strong competition. The variety of mutual fund types has grown, offering average Americans opportunities to invest money and diversify assets. Mutual fund costs have fallen, driven down by economies of scale and advances in computers and communications. Mutual fund investors have benefited from falling costs, which competition has passed along to them.

MORE>>>

WASHINGTON, D.C. – New Internal Revenue Service (IRS) data obtained by the Joint Economic Committee (JEC) show that the top one percent of tax filers paid 36.18 percent of federal personal income taxes in 1999, the latest year for which data are available, Chairman Jim Saxton said today. The 1999 share paid by the top one percent (ranked by adjusted gross income) reflects an increase from the 34.75 percent level posted in 1998. The 4.00 percent share paid by the bottom half of taxpayers was virtually unchanged during this period, as was the 96.00 percent share borne by the top half. The new data provide the necessary context in which to evaluate claims about the supposed distributional impact of various tax policy proposals.

MORE>>>
Download Data in PDF format

WASHINGTON, D.C. - For twenty years, American households have increased their holdings of mutual funds and other financial assets despite periods of inflation, disinflation, booms, bankruptcies, commodity price shocks, and financial crises at home and abroad. During the last ten years, lower inflation, lower interest rates and demographic factors have further boosted the demand for mutual funds.

Mutual funds are the primary financial assets of many middle-income households. More than 80 percent of mutual fund owners have annual household incomes below $100,000; their median financial assets are $80,000. Mutual fund assets make up 21 percent of all retirement assets.

Now is the right time to re-examine the taxation of investment returns on mutual funds. This study describes who owns mutual funds, what forces underlie growth in mutual fund ownership, and what effects changes in the capital gains taxation of mutual fund distributions could have.

MORE>>>

WASHINGTON, D.C. - The ongoing economic slowdown, exacerbated by the terrorist attacks of September 11, makes changes in economic policy necessary. While there is bipartisan agreement on the desirability of tax relief, the composition and scale of tax legislation are both matters of contention. This paper examines current economic conditions, the primary features of several options for tax relief under consideration in Congress, and their potential effects on the economy.

Current and ongoing Joint Economic Committee (JEC) research on major tax issues indicates that measures to reduce income tax rates and reduce the cost of capital would have positive short- and long-term effects on the economy. This study is divided into several sections: the economic impact of taxation, the recent historical record, and certain major provisions for tax relief under consideration. Among the findings are the following:

• The economy has been in an economic slowdown since the middle of 2000, led by a sharp decline in investment growth. The rebound previously projected by many macroeconomic forecasters for the last half of 2001 will probably be delayed or undermined by the terrorist attacks of September 11, 2001. Tax incentives for capital formation are especially appropriate given the important leading role of weakening investment in the economic slump.
• After the attacks, the extra security costs in the short run as well as in the long run will have effects similar to imposing a “security tax” on an already vulnerable economy. This security tax should be offset by tax policy, such as the relief provided under several core components of the Economic Security and Recovery Act of 2001 (H.R. 3090).
• The current tax code penalizes work, saving, investment, and entrepreneurship. Tax changes that reduce these penalties will improve long-term economic growth.
• According to an important and growing body of economic research, the current level of taxation imposes a large excess burden at the margin; 40 cents in lost economic welfare per dollar of tax would be a reasonable estimate. There is no reason for policymakers to accept such counterproductive results.
• If the tax bill increases the GDP growth rate by only one-tenth of one percentage point annually, it would produce enough additional revenue over 10 years to offset a significant portion of the estimated static revenue losses.
• The dynamic economic impact of properly designed tax legislation, and the high degree of income mobility in the United States, lead to broadly shared economic benefits that are often ignored in conventional revenue and distributional analysis.

MORE>>>

WASHINGTON, D.C. - The alternative minimum tax (AMT) for individuals is a separate system of income taxation that operates in parallel to the regular income tax. Taxpayers who may be affected by the AMT must recalculate their taxes using rules about income and deductions different from those that apply to regular income tax. If they owe more under the AMT than they would under regular income tax, they pay the AMT amount. 

Unlike the regular income tax, the AMT is not indexed for inflation. Over time, inflation and economic growth have made the AMT affect more and more taxpayers. In 1990, the AMT financially affected only about 132,000 taxpayers. In 2000, it affected an estimated 1.3 million taxpayers, and in 2010, it is projected to affect 17 million taxpayers.

The huge increase in taxpayers who will soon be affected by the AMT has led to Congressional proposals to overhaul or eliminate it. This paper examines the main options for dealing with the AMT.

MORE>>>

WASHINGTON, D.C. - In order to increase personal saving and investment and to promote tax neutrality among various investment vehicles, the tax treatment of capital gains unrealized by mutual fund shareholders should be modified. The current policy of taxing mutual fund capital gain distributions unfairly discriminates against taxpayers seeking the investment benefits of diversification through mutual funds instead of through direct ownership of stocks. Therefore, the practice of taxing forced distributions of capital gains to mutual fund shareholders should be changed to allow for a deferral of taxation on reinvested capital gain distributions. Until shareholders realize a capital gain through the sale of an asset, no tax liability should incur. Since mutual funds are a popular vehicle for saving and investment of middle-income households, this tax reform would greatly increase the incentives for these people to invest and save for their future by increasing their after-tax rate of return.

A tax deferral on mutual fund capital gain distributions as proposed in H.R. 168, sponsored by Rep. Jim Saxton (R-NJ), could increase the after-tax return by almost 15 percent over a 30-year period for many mutual fund shareholders. For a hypothetical taxpayer with an initial $10,000 investment in a mutual fund that returns 10 percent a year, the deferral on capital gain distributions as proposed in H.R. 168 would amount to $15,055 over a 30-year period after taxes. This amounts to approximately 150 percent of the original $10,000 investment.

A change in the tax treatment of mutual funds would have a beneficial impact on all owners of mutual funds, but the benefits would primarily help those making less than $100,000 a year -- 81% of households owning mutual funds, with 39% of households owning mutual funds earning less than $50,000 a year.

A deferral mechanism, as proposed under H.R. 168, is relatively simple and would not result in a significant paperwork burden for mutual funds or their shareholders.

MORE>>>

WASHINGTON, D.C. - With large and growing federal budget surpluses, and with the federal tax burden at a peacetime high, a broad spectrum of policymakers are supporting substantial income tax rate cuts. Tax rate cuts would not only provide tax relief to every income taxpayer, they would also spur economic growth by reducing the distortions created by income taxes. This report provides background on marginal tax rate levels, describes the economic costs created by high marginal rates, and summarizes tax rate trends in other industrial countries. The report finds:

• The combination of statutory income tax rates, income tax phase-out provisions, state income taxes, and payroll taxes can create excessive marginal rates for families at all income levels. 
• Over 20 million small businesses that pay tax under the personal income tax system would also benefit from rate reductions. Recent research finds a strong link between marginal tax rates and small business hiring and investment behavior.    
• High marginal tax rates distort work and savings decisions, and promote unproductive tax avoidance and evasion activities. These tax distortions create "deadweight losses" which lower the nation's standard of living. Each $1 of marginal tax rate cuts would save the private economy at least $1.25 as deadweight losses fall and economic efficiency increases.     
• The harmful effects of high marginal tax rates have persuaded dozens of countries to reduce rates in recent years. The average top personal income tax rate in the G-7 major economies has fallen 18 percentage points since 1980. In an increasingly competitive world, lowering our marginal rates would reduce the burden of our tax system and help sustain our economic leadership.

MORE>>>

WASHINGTON, D.C. – New Internal Revenue Service (IRS) data obtained by the Joint Economic Committee (JEC) show that the top one percent of tax filers paid 34.75 percent of federal personal income taxes in 1998, the latest year for which data are available, Vice Chairman Jim Saxton said today. The 1998 share paid by the top one percent (ranked by adjusted gross income) reflects an increase from the 33.17 percent level posted in 1997. The 4.21 percent share paid by the bottom half of taxpayers was virtually unchanged during this period. The new data provide the necessary context in which to evaluate claims about the supposed distributional impact of various tax policy proposals.

"The data publicly released by the JEC today reflect the steeply progressive impact of the federal income tax," Saxton said. "These data must be considered before any valid distributional evaluation of various income tax proposals can be made. Unfortunately, statistics portraying tax policy changes as skewed often are released without disclosing the share of taxes actually paid by various income groups. In other words, data on the share of taxes paid before and after a tax change would take effect are often concealed, producing misleading results. The bottom line is that these data are needed for an informed discussion of a wide array of tax issues."

According to a letter to Saxton from the Director of the Statistics of Income Division (SOI/IRS), these data were also recently provided to the Office of Tax Analysis of the Treasury Department.

MORE>>>
Download Data in PDF format

WASHINGTON, D.C. - To increase personal saving and investment and to promote tax neutrality among various investment vehicles, the tax treatment of capital gains unrealized by shareholders should be modified. The current practice of forcing distributions of capital gains to mutual fund shareholders should be changed. Until the shareholder realizes a capital gain through the sale of an asset, no tax liability should incur. With respect to regulated investment companies, the realization point that triggers a capital gains tax liability should be moved from the corporate level down to the individual shareholder level. Since mutual funds are a popular vehicle for saving and investment of middle-income households, this tax reform would greatly increase the incentives for these people to invest and save for their future by increasing their pre-liquidation rate of return.

MORE>>>

WASHINGTON, D.C. - Abstract The analysis of tax data is a time intensive and complicated process. Much time and effort are spent collecting income and tax data, compiling data sets and running statistical analyses. However, it appears that relatively little time and effort are spent actually understanding the data and how best to present results to the public of analyses of using tax data. This is evident in the overuse of averages and the simplistic classification of taxpayers into income ranges and quintiles by tax distribution tables that are often highly publicized. This study shows that the link between income and tax liability is much more tenuous that that often presumed and that a variety of other factors can greatly affect tax liability. Specifically, this report finds that, among other things:

   WASHINGTON, D.C. - This analysis examines recent trends in stock ownership and explains the reasons for the dramatic increase in stock ownership among a broader and increasingly diverse number of Americans. The key reasons for this democratization of the stock market include:

• The popularization of the mutual fund.
• The general reduction in the multiple taxation of savings and investment that resulted from the genesis of the IRA and 401(k) plan.
• The emphasis of the Federal Reserve on price stability which has lowered interest rates, stabilized financial markets, and acted as a de facto tax cut.

MORE>>>

WASHINGTON, D.C. - The analysis of tax policy and tax legislation can be "highly conjectural" and consequently more art than science. Tables and figures detailing revenue effects and distribution of burdens associated with projected outcomes of proposed tax legislation are often presented in ways that distort or fail to disclose information regarding the economic outcomes. Additionally, some of these tables are based on data sources that are statistically compromised and for which statistical measures of accuracy are impossible to calculate. Furthermore, the public is often not informed as to the limitations inherent in the information. Members of Congress, students of tax analysis, the media and ordinary citizens seeking to understand the economic effects of proposed tax legislation are inundated with revenue estimates and distributional tables that often obscure the economic issues and hinder the policy process.

MORE>>>

This study argues that tax reduction would have very significant positive welfare effects on the American economy. Based on previous research by a large number of scholars, it is reasonable to foresee the equivalent of tens of billions of dollars of new output being created with a significant reduction in taxes. While it is true that from a Keynesian, demand-side perspective, the case for a tax reduction is rather weak, there are compelling arguments that suggest that lowering taxes would promote economic welfare. A tax reduction that approximates the magnitude of the 1998 or projected 1999 budget surplus would provide benefits to Americans measured in tens of billions of dollars annually.

MORE>>>