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|
SPONSOR: |
|
DATE TYPED: |
|
HB |
|
||
|
SHORT TITLE: |
Reduce Income Tax Rates |
SB |
238 |
||||
|
|
ANALYST: |
Smith |
|||||
REVENUE
|
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
|
FY03 |
FY04 |
|
|
|
|
|
(17,110.0) |
(299,300.0) |
Recurring |
Personal Income Tax rate cut
|
|
|
(4,176.0) |
(10,297.0) |
Recurring |
Capital Gains Deduction |
|
|
(21,286.0) |
(309,597.0) |
Recurring |
Total General Fund |
|
|
|
|
|
|
(Parenthesis ( ) Indicate Revenue Decreases)
Conflicts with HB54, HB56,HB167, SB167
Responses
Received From
TRD
SUMMARY
Synopsis
of Bill
Senate Bill 238 reduces
In tax year 2003, the
top tax rate would be reduced to 7.7% but no changes would be made to income
brackets. In tax year 2004 and
thereafter, the top rate would be reduced to 5.5%, and the income brackets
would be modified.
Significant Issues
TRD has provided the
following rate table.
Current and Proposed Personal Income Tax Rates
|
Current |
Joint |
Single |
Separate |
Head of Household |
||||
|
|
Taxable Income |
Taxable Income |
Taxable Income |
Taxable Income |
||||
|
Rate (%) |
From |
to |
From |
to |
From |
to |
From |
to |
|
1.7 |
0 |
8,000 |
0 |
5,500 |
0 |
4,000 |
0 |
7,000 |
|
3.2 |
8,001 |
16,000 |
5,501 |
11,000 |
4,001 |
8,000 |
7,001 |
14,000 |
|
4.7 |
16,001 |
24,000 |
11,001 |
16,000 |
8,001 |
12,000 |
14,001 |
20,000 |
|
6 |
24,001 |
40,000 |
16,001 |
26,000 |
12,001 |
20,000 |
20,001 |
33,000 |
|
7.1 |
40,001 |
64,000 |
26,001 |
42,000 |
20,001 |
32,000 |
33,001 |
53,000 |
|
7.9 |
64,001 |
100,000 |
42,001 |
65,000 |
32,001 |
50,000 |
53,001 |
83,000 |
|
8.2 |
101,000 |
& above |
65,001 |
& above |
50,001 |
& above |
83,001 |
& above |
|
|
|
|
|
|
|
|
|
|
|
Proposed |
Joint |
Single |
Separate |
Head of Household |
||||
|
Tax Year 2003 |
Taxable Income |
Taxable Income |
Taxable Income |
Taxable Income |
||||
|
Rate (%) |
From |
to |
From |
to |
From |
to |
From |
to |
|
1.7 |
0 |
8,000 |
0 |
5,500 |
0 |
4,000 |
0 |
7,000 |
|
3.2 |
8,001 |
16,000 |
5,501 |
11,000 |
4,001 |
8,000 |
7,001 |
14,000 |
|
4.7 |
16,001 |
24,000 |
11,001 |
16,000 |
8,001 |
12,000 |
14,001 |
20,000 |
|
6 |
24,001 |
40,000 |
16,001 |
26,000 |
12,001 |
20,000 |
20,001 |
33,000 |
|
7.1 |
40,001 |
64,000 |
26,001 |
42,000 |
20,001 |
32,000 |
33,001 |
53,000 |
|
7.7 |
64,001 |
& above |
42,001 |
& above |
32,001 |
& above |
53,001 |
& above |
|
|
|
|
|
|
|
|
|
|
|
Proposed |
Joint |
Single |
Separate |
Head of Household |
||||
|
Tax Year 2004 |
Taxable Income |
Taxable Income |
Taxable Income |
Taxable Income |
||||
|
Rate (%) |
From |
to |
From |
to |
From |
to |
From |
to |
|
1.7 |
0 |
15,000 |
0 |
10,000 |
0 |
7,500 |
0 |
12,500 |
|
3.2 |
15,001 |
24,000 |
10,001 |
16,000 |
7,501 |
12,000 |
12,501 |
20,000 |
|
4.7 |
24,001 |
45,000 |
16,001 |
30,000 |
12,001 |
22,500 |
20,001 |
37,500 |
|
5.5 |
45,001 |
& above |
30,001 |
& above |
22,501 |
& above |
37,501 |
& above |
|
|
|
|
|
|
|
|
|
|
FISCAL IMPLICATIONS
The impacts of the
capital gains deduction are evaluated under the proposed tax rates. If the tax rate changes are not adopted, the
impacts of the capital gains provisions compared to present law tax rates would
be larger. Further, capital gains
realization levels have been suppressed by recent stock market performance.
While a “bounce” back to the levels of the late 1990’s is not anticipated, it
should be noted that realizations are notoriously volatile and difficult to
forecast.
OTHER SUBSTANTIVE ISSUES
TRD has provided a
table showing the benefits to taxpayer by income and filing status.
|
Table 2: Effects of
Proposed Tax Reduction by Taxable Income and Filing Status |
|||||||
|
|
Tax Year 2003 |
Tax Year 2004 |
|
||||
|
Taxable Income and Filing Status |
Present Law Liability* |
Proposed Law Liability* |
Change in Liability* |
Present Law Liability* |
Proposed Law Liability* |
Change in Liability* |
|
|
|
|
|
|
|
|
|
|
|
Married Filing Joint |
|
|
|
|
|
|
|
|
0 to
8,000 |
2.0 |
2.0 |
|
2.1 |
2.1 |
|
|
|
8,001 to
16,000 |
9.4 |
9.4 |
|
10.0 |
7.5 |
(2.5) |
|
|
16,001 to
24,000 |
18.2 |
18.2 |
|
19.6 |
14.0 |
(5.6) |
|
|
24,001 to
40,000 |
76.2 |
76.2 |
|
81.4 |
60.3 |
(21.2) |
|
|
40,001 to
64,000 |
159.2 |
159.1 |
|
169.3 |
126.0 |
(43.2) |
|
|
64,001 to 100,000 |
165.9 |
164.5 |
(1.4) |
175.7 |
128.4 |
(47.3) |
|
|
100,001
and over |
291.7 |
280.4 |
(11.3) |
306.4 |
212.7 |
(93.7) |
|
|
Total |
722.5 |
709.8 |
(12.7) |
764.4 |
551.0 |
(213.5) |
|
|
|
|
|
|
|
|
|
|
|
Single |
|
|
|
|
|
|
|
|
0 to
5,500 |
5.6 |
5.6 |
|
5.9 |
5.3 |
(0.6) |
|
|
5,500
to 11,000 |
19.5 |
19.5 |
|
20.9 |
15.2 |
(5.7) |
|
|
11,000
to 16,000 |
27.9 |
27.9 |
|
29.8 |
22.3 |
(7.6) |
|
|
16,000 to 26,000 |
57.1 |
57.1 |
|
60.8 |
45.2 |
(15.6) |
|
|
26,000 to 42,000 |
47.2 |
47.2 |
|
50.0 |
36.7 |
(13.3) |
|
|
42,000 to 65,000 |
27.2 |
26.3 |
(0.9) |
28.7 |
20.4 |
(8.3) |
|
|
65,000
and over |
48.2 |
46.0 |
(2.2) |
50.5 |
34.7 |
(15.9) |
|
|
Total |
232.7 |
229.5 |
(3.2) |
246.8 |
179.8 |
(66.9) |
|
|
|
|
|
|
|
|
|
|
|
Separate |
|
|
|
|
|
|
|
|
0
to 4,000 |
0.0 |
0.0 |
- |
0.0 |
0.0 |
|
|
|
4,000
to 8,000 |
0.1 |
0.1 |
- |
0.1 |
0.1 |
|
|
|
8,000
to 12,000 |
0.2 |
0.2 |
- |
0.3 |
0.2 |
(0.1) |
|
|
12,000 to 20,000 |
1.0 |
1.0 |
- |
1.1 |
0.8 |
(0.3) |
|
|
20,000 to 32,000 |
1.8 |
1.8 |
- |
1.9 |
1.4 |
(0.5) |
|
|
32,000 to 50,000 |
1.8 |
1.7 |
(0.0) |
1.9 |
1.4 |
(0.5) |
|
|
50,000
and over |
6.3 |
6.0 |
(0.3) |
6.6 |
4.5 |
(2.1) |
|
|
Total |
11.2 |
10.9 |
(0.3) |
11.8 |
8.4 |
(3.4) |
|
|
|
|
|
|
|
|
|
|
|
Head of Household |
|
|
|
|
|
|
|
|
0
to 7,000 |
1.7 |
1.7 |
|
1.8 |
1.8 |
|
|
|
7,000
to 14,000 |
4.7 |
4.7 |
|
5.0 |
3.8 |
(1.2) |
|
|
14,000
to 20,000 |
6.0 |
6.0 |
|
6.5 |
4.7 |
(1.7) |
|
|
20,000 to 33,000 |
11.5 |
11.5 |
|
12.3 |
9.2 |
(3.1) |
|
|
33,000 to 53,000 |
12.3 |
12.3 |
|
13.1 |
9.8 |
(3.3) |
|
|
53,000 to 83,000 |
7.2 |
7.1 |
(0.1) |
7.6 |
5.6 |
(2.0) |
|
|
83,00
and over |
10.3 |
9.9 |
(0.4) |
10.8 |
7.5 |
(3.3) |
|
|
Total |
53.6 |
53.1 |
(0.5) |
57.0 |
42.4 |
(14.6) |
|
|
*$Millions |
|
|
|
|
|
|
|
Additionally,
TRD has provided a table showing the benefits to
taxpayers of the capital gains reduction.
Estimated
Distributional Impacts of the Capital Gains Proposal For Selected Years:
Tax
Year 2003
|
Adjusted Gross Income |
Net Capital Gains |
Increased Deductions |
Decreased Tax Liability |
|
|
|
(millions) |
(millions) |
(thousands) |
|
|
$0 or Less |
$10,000 |
$22.3 |
$0.0 |
$0.0 |
|
$10,000 |
$20,000 |
$15.0 |
$0.0 |
$0.0 |
|
$20,000 |
$30,000 |
$17.9 |
$0.0 |
$0.0 |
|
$30,000 |
$50,000 |
$45.0 |
$0.0 |
$0.0 |
|
$50,000 |
$75,000 |
$70.1 |
$0.0 |
$0.0 |
|
$75,000 |
$100,000 |
$70.1 |
$1.9 |
$129 |
|
$100,000 |
$150,000 |
$104.6 |
$4.9 |
$349 |
|
$150,000 |
$200,000 |
$69.5 |
$4.5 |
$314 |
|
$200,000 |
Over |
$541.5 |
$48.0 |
$3,384 |
|
|
Total |
$956.1 |
$59.3 |
$4,176 |
Tax
Year 2006
|
Adjusted Gross Income |
Net Capital Gains |
Increased Deductions |
Decreased Tax Liability |
|
|
|
(millions) |
(millions) |
(thousands) |
|
|
$0 or Less |
$10,000 |
$28.3 |
$10.6 |
$159 |
|
$10,000 |
$20,000 |
$19.1 |
$5.3 |
$92.3 |
|
$20,000 |
$30,000 |
$22.8 |
$7.2 |
$217 |
|
$30,000 |
$50,000 |
$57.1 |
$20.6 |
$874 |
|
$50,000 |
$75,000 |
$89.1 |
$35.3 |
$1,596 |
|
$75,000 |
$100,000 |
$89.1 |
$38.0 |
$1,779 |
|
$100,000 |
$150,000 |
$132.9 |
$59.4 |
$2,876 |
|
$150,000 |
$200,000 |
$88.3 |
$41.0 |
$1,983 |
|
$200,000 |
Over |
$688.0 |
$336.2 |
$16,267 |
|
|
Total |
$1,214.7 |
$553.6 |
$25,844 |