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1 Gerald Prante, IRS Data Reveal Which States Benefited Most from 2001 and 2003 Tax Cuts 1 (2006)

handle is hein.taxfoundation/ffgixz0001 and id is 1 raw text is: r:OuU NDAT10N. October 4, 2006 IRS Data Reveal Which States Benefit Most from 2001 and 2003 Tax Cuts by Gerald Prante Fiscal Fact No. 68 Across the nation, nearly every income group in every state has had its federal income taxes cut in recent years. With new data from the Internal Revenue Service (IRS) on the taxes paid for 2004, we can now see the full effects of the so-called Bush tax cuts enacted in 2001 and 2003. These new data let us see how the recent tax cuts have played out along the income spectrum within each state, as well as which states have benefited most. Because states have different demographic profiles, some states' taxpayers benefit more than others from the tax cuts. For example, states with more children benefit more every year from the $1,000 per child tax credit, and because people with incomes over $110,000 are denied the full deduction, states with more children in low- and middle- income households benefit even more from that part of the Bush tax plan. Similarly, reductions in the top tax rates give more relief to states with many high-income earners; the new 10-percent bracket gives more relief to states with many low- and middle-income earners; and the marriage penalty relief benefits states with more middle- income married couples. There are several ways to measure tax cuts, two of which are used in the table below. The table shows the tax payment in dollars for the average tax return within each income range, using the effective tax rates for those groups in 2000 and in 2004. Of course, one way to quantify the tax cut is to simply subtract 2004's tax payment from 2000's. The other is to compute the percentage drop. Both are valid, accurate ways of expressing how much money recent tax changes have saved taxpayers. States with Largest and Smallest Tax Savings The states that realized the biggest tax savings as a dollar amount were high-income states: Massachusetts, Washington, Connecticut, California, and New Hampshire. At the other end of the spectrum, the bottom five states were New Mexico, North Dakota, Montana, West Virginia, and Hawaii.

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