September 16, 1998

Understanding the Joint Tax Committee Report
on the Distributional Effects of the Archer Bill

The Joint Committee on Taxation today released an analysis of the distributional effects of the Taxpayer Relief Act of 1998.(1) This analysis shows that the bill directs most of its benefits to upper middle-income families. However, the JCT assessment does not include the effects of the bill's estate tax provisions; those provisions — which account for nearly a quarter of the bill's cost over the next five years — will benefit only the wealthiest households. As a result, the JCT analysis presents an incomplete picture of legislation that provides a disproportionate amount of its tax cuts to higher-income households and offers little tax relief to low and moderate-income families.

Distributional Effects of the Archer Tax Bill
Income Category Percentage of All Households Share of Tax Cut without Estate Tax Reduction Share of Tax Cut with Estate Tax Reduction
Less than $50,000 64% 27% 21%
$50,000 to $100,000 25% 52% 43%
Over $100,000 11% 20% 36%

End Notes:

1. Distributional Effects of the Taxpayer Relief Act of 1998, Joint Committee on Taxation, September 15.

2. JCT did not specify how many households fall into each of the income categories it analyzed. CBO, however, uses a measure of family income similar to that used by JCT; the CBO distribution is used in this analysis for purposes of considering the percent of taxpayers at different income levels that benefit from the tax cut. See Estimates of Federal Income Tax Liabilities for Individuals and Families by Income Category and Family Type for 1995 and 1999, Congressional Budget Office, May 1998.

3. This analysis makes the conservative assumption that 90 percent of the estate tax cuts accrue to households with over $100,000 in income, and that 10 percent accrue to households with between $50,000 and $100,000 in income. It is likely that this assumption understates the extent to which the estate tax cuts benefit very high-income taxpayers.

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