The Tax Foundation has estimated what the revenue impact of an
income tax rebate of the 10% rate would be in 2008. Media reports
suggest this may be one component of President Bush’s plan to stimulate
the economy. Taxpayers would receive a rebate check, likely based on
their 2006 tax returns. The 10% rate would be set to zero when
taxpayers file returns for tax year 2008. The summary of our results:
a baseline assumption of no AMT patch (current law), reducing the 10%
rate to zero would cost approximately $58 billion for calendar year
2008 (static score).
- Under a baseline assumption of an AMT
patch, reducing the 10% rate to zero would cost approximately $96
billion for calendar year 2008.
- Reducing the 10% rate to zero
would push about 11 million more returns into AMT for 2008 (under
current law) and raises the price of an AMT patch for 2008 from $55
billion to $93 billion.
- Approximately 29.6% of tax returns
(representing 41.2 million of the nation’s projected 139 million tax
returns in 2008) are scheduled to pay nothing in federal individual
income taxes in 2008 and would therefore receive no savings by a mere
reduction in the 10% rate.
- Currently, 41.2 million returns pay
nothing in federal individual income taxes in 2008, and reducing the
10% rate to zero for 2008 would increase this number to 62.9 million.
to the non-payers and because high-income individuals are more likely
to be married, 21.2 percent of the tax savings from the reduction will
go to those tax returns earning over $100,000, despite the fact that
they make up only 13.8 percent of tax returns. (Assumes AMT patch
baseline). However, ignoring the non-paying taxpayers, this reduction
would make the tax code more progressive, because those making $60,000
receive greater savings as a percentage of their incomes as compared to
those making $1 million.