From: The Tax Foundation Blog
by Patrick Fleenor and Gerald Prante
The Tax Foundation has estimated what the revenue impact of anincome tax rebate of the 10% rate would be in 2008. Media reportssuggest this may be one component of President Bush's plan to stimulatethe economy. Taxpayers would receive a rebate check, likely based ontheir 2006 tax returns. The 10% rate would be set to zero whentaxpayers file returns for tax year 2008. The summary of our results:
- Undera baseline assumption of no AMT patch (current law), reducing the 10%rate to zero would cost approximately $58 billion for calendar year2008 (static score).
- Under a baseline assumption of an AMTpatch, reducing the 10% rate to zero would cost approximately $96billion for calendar year 2008.
- Reducing the 10% rate to zerowould push about 11 million more returns into AMT for 2008 (undercurrent law) and raises the price of an AMT patch for 2008 from $55billion to $93 billion.
- Approximately 29.6% of tax returns(representing 41.2 million of the nation's projected 139 million taxreturns in 2008) are scheduled to pay nothing in federal individualincome taxes in 2008 and would therefore receive no savings by a merereduction in the 10% rate.
- Currently, 41.2 million returns paynothing in federal individual income taxes in 2008, and reducing the10% rate to zero for 2008 would increase this number to 62.9 million.
- Dueto the non-payers and because high-income individuals are more likelyto be married, 21.2 percent of the tax savings from the reduction willgo to those tax returns earning over $100,000, despite the fact thatthey make up only 13.8 percent of tax returns. (Assumes AMT patchbaseline). However, ignoring the non-paying taxpayers, this reductionwould make the tax code more progressive, because those making $60,000receive greater savings as a percentage of their incomes as compared tothose making $1 million.
Click here to read the full analysis. Click here for more Tax Foundation discussion of the stimulus proposals.