IRS Data on the Capital Gains Tax Cut in Each State: Data Show Benefits Sharply Skewed To High-Income Filers
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 | Taxfilers with Income | |||
| Percent of | Percent of| | Percent of | Percent of | |
| 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) | ||||
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