May 7, 2003

by Isaac Shapiro

PDF of full report

View Related Analyses

If 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.

Taxpayers with incomes of more than one million dollars —referred to here as “millionaires” — would reap huge and disproportionate gains from the tax plan that was adopted May 6 by the Ways and Means Committee of the House of Representatives.  As a result of the bill’s personal income tax cut provisions (and not counting the benefits these individuals might receive from the bill’s substantial tax cuts for businesses):

Who Gets the Ways and Means Tax Cuts?


Number of Households, 2003

Proportion of U.S. Households, 2003

Tax Cut Amount,


Households with Income Over $1 Million


Top 0.1%

$139 billion

Households with Income Below About $95,000*


Bottom 89%

$139 billion

*Income cut-off is slightly below $95,000


How these estimates were made and why the amount to millionaires may be somewhat understated

The Tax Policy Center has published a series of tables on the distribution of the Ways and Means bill.  Tax filers are categorized by “adjusted gross income,” an income measure derived from tax returns that includes deductions that have the effect of lowering income levels.  The Tax Policy Center examines the bill’s effects on “filing and non-filing tax units,” which are referred to in this analysis by the shorthand of “households.”  The Tax Policy Center estimates there will be 184,000 households with incomes above one million dollars in 2003, or 0.13 percent of households.[1]  The bottom 89 percent of households equate to 124 million households.

This analysis calculates the benefits of the Ways and Means bill to millionaires by applying the distribution of the tax cuts estimated by the Tax Policy Center and the cost of the tax cuts as estimated by Congress’ Joint Committee on Taxation.  Since the Tax Policy Center and the Joint Committee use somewhat different models to estimate the effects of tax proposals, mixing the two together yields some imprecision.  But the fundamental story told by the estimates — that the total amount of tax cuts in the Ways and Means bill received by a relatively small number of millionaires will be as large as the total amount of the tax cuts received by the vast majority of other households — is certain to be on the mark.  The Tax Policy Center distributional figures have been widely cited and are well-respected.  The Joint Committee on Taxation’s estimates are the official cost estimates of the proposal.

The following example illustrates how the estimates used in this analysis were calculated.  The Tax Policy Center found that when fully in effect, 38.8 percent of the tax cuts from this proposal would go to millionaires.  The Joint Committee on Taxation estimates the cost of this proposal as $277 billion through 2013.  In essence, $277 billion was multiplied by 0.388 to yield the $107 billion referred to on the previous page.[2]

Tax cuts received by millionaires and the bottom 89% of households under the dividends/capital gains provision
and under the other personal income tax provisions of the Ways and Means bill, 2003-2013


Total cost,


% of provisions’ cuts to millionaires

Dollar cuts to millionaires

% of cuts to

bottom 89%

Dollar cuts to

bottom 89%

Dividend/capital gains

$277 billion


$107 billion


$47 billion

Other personal income tax provisions

$234 billion


$32 billion


$92 billion


$511 billion


$139 billion


$139 billion

The approach used here likely understates the tax cut benefits that millionaires would receive.  Most notably, only the individual income tax cuts were distributed by the Tax Policy Center.  The business tax cuts are not considered.  They could also yield large benefits to millionaires.  For instance, the bonus depreciation provision would be of substantial benefit to corporations.[3]  This provision would provide $21 billion in tax cuts, according to the Joint Tax Committee, but the costs would rise to close to $400 billion if, as is likely and as its authors’ may intend, it is subsequently extended through 2013.[4]  Since the owners of corporations tend to have very high incomes, the bonus depreciation provision might be of particular benefit to millionaires.

End Notes:

[1] The actual number of households having more than one million dollars will not remain constant from 2003-2013.  Also, some households will be millionaires one year but not the next.  This analysis assumes the proportion of all households that are millionaires remains the same in the 2004-2013 period as the Tax Policy Center estimates for 2003, as does the proportion of income they receive. If income becomes more concentrated than this, the findings of this analysis will turn out to be understated; if income becomes less concentrated, the findings will be overstated.

[2] The phrase “in essence” is used because the actual calculation included one minor adjustment.  In 2003, the distribution of the capital gains/dividend tax cut would be slightly less tilted to millionaires than when the proposal would be fully in effect because the capital gains tax cut would only be in place for two-thirds of the calendar year.  The analysis accounted for this small difference for the first year of the proposal.  With or without this adjustment, the total tax cuts going to millionaires rounds to $107 billion through 2013.

[3] The approach used here also likely understates benefits to millionaires for a more technical reason.  The Joint Committee on Taxation assumes a behavioral response to the reduction in capital gains taxes; that is, it assumes more individuals will sell their assets if capital gains tax rates are lower.  The larger amount of sales reduces the impact of the proposal on revenues even though it increases the amount of tax cuts actually received.  The approach used here is based on a proportion of the revenue loss number that the Joint Committee shows, and thus produces less tax cuts for millionaires than would an approach based on a proportion of all capital gains sales.

[4] See the Center on Budget and Priorities analysis “Tax Policy Center and CBPP Analyses Show That Thomas Tax Plan Would Be More Tilted Toward the Very Wealthy — And More Expensive — Than Bush Plan.”