Dear Colleague,
At my request, the non-partisan Joint Committee on Taxation has prepared an analysis of the distributional impact of two different proposals to extend tax relief set to expire at the end of this year. In particular, I asked the Joint Committee on Taxation to compare the distributional impact of extending middle-class tax relief in a manner consistent with provisions included in statutory PAYGO legislation (i.e., tax relief for income under $200,000 for single filers and $250,000 for joint filers) against the distributional impact of extending middle-class tax relief as well as tax cuts for income over the income levels mentioned above.
This analysis found the following:
* Tax relief consistent with the provisions included in statutory PAYGO legislation would continue existing tax relief for 98 percent of taxpayers (i.e., taxpayers with income below $200,000 for single filers and $250,000 for joint filers).
* While tax relief consistent with the provisions included in statutory PAYGO legislation would also benefit taxpayers with income above $200,000 for single filers and $250,000 for joint filers, it would cap these benefits at the maximum amount that a middle-class family could receive (i.e., $6,300 to $6,700).
* If tax relief is extended for income above $200,000 for single filers and $250,000 for joint filers, the one-year cost of these additional upper-income tax cuts would be $38.8 billion in 2011, and nearly $700 billion over ten years. The vast majority of this amount (79 percent) would go to 315,000 households that make more than $1 million, the wealthiest one-fifth of one percent of taxpayers, and essentially all (96 percent) would go to 923,000 households that make more than $500,000.
* The result would be that, in the first year (2011), households that make more than $1 million (315,000 returns out of more than 161 million taxpayers nationwide) would receive an average tax cut of $103,000.
Finally, regarding the relationship between the extension of additional upper-income tax cuts and small businesses, recent estimates from the non-partisan Tax Policy Center indicate that such extension would affect less than two percent of small business owners.
I hope that you find this information useful as the Congress considers various options relating to expiring tax relief, including the 2001 and 2003 tax cuts.
Sincerely,
/s/
Sander M. Levin
Chairman
Committee on Ways and Means
Documents
Aug. 10, 2010 JCT Distribution Table 1
Aug. 10, 2010 JCT Distribution Table 2
Aug. 10, 2010 JCT Distribution Table 3
