November 7, 2005 IRS DATA ON THE CAPITAL GAINS TAX CUT IN EACH STATE
Data Show Benefits Sharply Skewed To High-Income Filers
By Joel Friedman and Katharine Richards
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Federal Tax PolicyIf you cannot access the files through the links, right-click on the underlined text, click "Save Link As," download to your directory, and open the document in Adobe Acrobat Reader. During consideration of the reconciliation tax-cut bill in coming weeks, Congress is expected to debate whether to extend a variety of tax cuts scheduled to expire in 2005 or subsequent years. Much attention is likely to be focused on whether to extend the reduction in the capital gains tax rate that was enacted in 2003 and that is set to expire in 2008. The table on the following page is based on Internal Revenue Service data for 2003; it shows the distribution in each state of the benefits from the capital gains tax cut. It thus provides a sense of who will benefit from extending this tax cut.
The table shows the percentage of tax returns filed in each state that reported adjusted gross income of less than $50,000, and the percentage in each state with income above $200,000. It also shows the proportion of the total tax savings from the capital gains rate cut that was received by each of these two income groups. The IRS calculated the savings based on the net capital gains reported in each state.
For example, as shown in the first row of the table, 70.7 percent of all filers in the nation had annual income below $50,000 in 2003; but this group received only 3.2 percent of the benefits from the capital gains tax cut that year. In contrast, those with incomes above $200,000 represented 2.0 percent of all filers, but received 80.5 percent of the capital gains tax-cut benefits. (The remaining 16.3 percent of the tax-benefit went to filers with incomes between $50,000 and $200,000.) The table provides comparable figures for each state.
DISTRIBUTION OF CAPITAL GAINS TAX CUT BENEFITS IN 2003, BY STATE
Taxfilers with Income
|Under $50,000Taxfilers with Income
Over $200,000
Percent of Returns
Percent of Capital Gains Tax Cut
Percent of Returns
Percent of Capital Gains Tax Cut
United States
70.7%
3.2%
2.0%
80.5%
Alabama
75.4%
5.8%
1.3%
71.8%
Alaska
69.3%
2.2%
1.4%
70.9%
Arizona
71.8%
3.9%
1.7%
74.9%
Arkansas
77.9%
7.5%
1.1%
69.6%
California
68.2%
2.1%
2.6%
84.3%
Colorado
67.2%
3.2%
2.2%
79.8%
Connecticut
61.6%
0.9%
3.9%
88.6%
Delaware
67.5%
1.1%
1.9%
80.4%
Washington, DC
69.9%
1.5%
3.6%
90.5%
Florida
75.0%
2.1%
1.9%
82.8%
Georgia
71.8%
3.8%
1.9%
79.3%
Hawaii
71.4%
3.1%
1.5%
71.5%
Idaho
75.0%
13.8%
1.2%
59.1%
Illinois
67.9%
2.8%
2.3%
83.8%
Indiana
70.9%
5.6%
1.3%
72.6%
Iowa
71.9%
10.4%
1.2%
57.3%
Kansas
71.4%
5.5%
1.5%
74.7%
Kentucky
74.6%
9.6%
1.2%
62.5%
Louisiana
76.7%
4.2%
1.2%
70.8%
Maine
73.9%
4.8%
1.3%
64.4%
Maryland
63.2%
2.2%
2.6%
82.1%
Massachusetts
64.0%
1.1%
3.1%
85.7%
Michigan
68.1%
2.8%
1.6%
75.2%
Minnesota
66.3%
4.6%
2.1%
73.8%
Mississippi
79.6%
10.4%
1.0%
66.0%
Missouri
72.7%
8.2%
1.4%
67.3%
Montana
78.1%
11.8%
1.1%
57.3%
Nebraska
72.9%
10.8%
1.3%
65.3%
Nevada
70.7%
3.3%
1.9%
86.3%
New Hampshire
65.3%
2.0%
2.0%
75.3%
New Jersey
62.7%
*
3.5%
86.2%
New Mexico
77.0%
5.9%
1.1%
65.6%
New York
69.4%
2.0%
2.6%
90.2%
North Carolina
73.2%
3.5%
1.6%
73.5%
North Dakota
75.0%
16.3%
1.1%
52.0%
Ohio
73.1%
3.2%
1.3%
72.9%
Oklahoma
76.3%
7.9%
1.2%
72.8%
Oregon
71.4%
7.3%
1.5%
66.9%
Pennsylvania
70.7%
1.9%
1.8%
80.3%
Rhode Island
68.7%
1.5%
1.9%
73.9%
South Carolina
75.5%
4.7%
1.3%
69.8%
South Dakota
76.1%
17.3%
1.2%
50.2%
Tennessee
75.0%
4.6%
1.5%
77.8%
Texas
73.3%
3.1%
1.8%
84.3%
Utah
71.9%
5.7%
1.4%
74.1%
Vermont
72.4%
7.1%
1.4%
58.7%
Virginia
65.6%
2.9%
2.4%
78.7%
Washington
66.7%
3.7%
2.0%
76.3%
West Virginia
76.8%
7.9%
0.8%
58.3%
Wisconsin
68.7%
7.7%
1.5%
64.6%
Wyoming
71.3%
4.4%
1.4%
82.0%
*Net capital gains were negative for this income group (i.e., losses exceeded gains)
Source: Internal Revenue Service, Statistics of Income.