NCPA - National Center for Policy Analysis

Different Benefits to Different Families

January 10, 2003

An analysis of President Bush's mammoth tax plan by Deloitte & Touche shows that two-parent households with children will benefit the most -- proportionate to their tax liability under current law. Upper income taxpayers will receive a smaller percentage reduction in their taxes than lower and middle income taxpayers. But the actual dollar amount of the reduction will be higher for higher income taxpayers -- because they pay a larger portion of their income in taxes and shoulder most of the income tax burden.

  • Federal taxes for an unmarried person with no children earning $40,000 a year would drop by $126, or 2.53 percent, to $4,860.
  • By contrast, a married couple with two children would see their federal income taxes almost evaporate from $1,178 under current law to a mere $45.
  • Married couples with children would do significantly better than single people at every income level.

In general, the dollar value of proposed income tax cuts climbs roughly in line with a person's income. (See Figure) But as a percentage of their tax liability, middle income taxpayers benefit the most. For example,

  • A couple with two children earning $250,000 a year would receive an 8 percent cut in their tax liability -- from $51,000 to $47,000.
  • A family with a $100,000 income would see a 21 percent fall in their tax liability, and a $60,000 a year family would receive a 27 percent cut.
  • But the same-size family with a $40,000 a year would receive a 96 percent cut in their federal income tax burden.

Few families with lower incomes pay any income tax whatsoever.

Source: Edmund L. Andrews, "Plan Gives Most Benefits to Wealthy and Families," New York Times, January 8, 2003.


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