Bush Investment Tax Cut Benefits Skewed Towards Wealthy, CTJ Argues

by Leroy Baker, Tax-News.com, New York

15 August 2007

A new report by taxpayer advocacy group, Citizens for Tax Justice (CTJ) claims that the vast majority of taxpayers have not benefited from cuts in capital gains and dividend taxes, with most of the tax savings being enjoyed by a small minority of wealthy taxpayers.

According to the CTJ, newly released information from the Internal Revenue Service shows that the special low tax rates on capital gains and dividends, enacted or expanded by President Bush, reduced income tax payments by $91.7 billion in 2005.

Citing the IRS figures, CTJ claimed that almost three quarters (73.4%) of those tax reductions went to the 0.6% of taxpayers reporting 2005 adjusted gross incomes in excess of $500,000, who on average saved $81,204 each. The 13,776 tax filers with adjusted gross incomes in excess of $10 million — or 0.01% of all filers — received 28.2% of the total tax savings. Their average tax break was $1,876,280 each.

By contrast, the 67 million tax filers who reported adjusted gross incomes of less than $30,000 — half of all filers — received virtually none of the benefits of the capital gains and dividends tax breaks, CTJ said.

“Few if any special tax breaks are so narrowly focused on so few taxpayers,” noted Robert S. McIntyre, director of Citizens for Tax Justice. “When half a percent of all tax filers gets three-quarters of the benefits of a tax subsidy, you can bet that the politicians who voted them this largesse probably know most of them personally.”

The special 15% tax rate for dividends was enacted in the 2003 tax cut legislation signed by President Bush. The same legislation increased an existing tax break for capital gains by lowering the capital gains tax rate from 20% to 15%. Ordinary income tax rates are as high as 35%. The Bush tax cuts were later extended by Congress through the end of 2010.

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