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1 Ed Gerrish, Tax Cut Expiration Would Impact States Unevenly 1 (2012)

handle is hein.taxfoundation/ffdcaxz0001 and id is 1 raw text is: July 17,2012 No. 320 Tax Cut Expiration Would Impact States Unevenly By Ed Gerrish President Obama recently called for letting the Bush tax cuts expire for people who make more than $250,000 a year. Senator Chuck Schumer and Representative Nancy Pelosi had previously called for an extension of the tax cuts for those earning up to $1 million dollars, only to abandon that position in favor of President Obama's proposal. Recently, and for the first time, the IRS published state-level data on tax returns with adjusted gross incomes over $1 million for tax year 2010. Together with data on incomes over $200,000, we can finally take a look at who might win and who might lose as a result of President Obama's tax proposal.1 Fact #1: Returns with adjusted gross income over $1 million a year were only 0.19% of total tax returns but 22% of total taxes paid. Those making over $200,000 were 3% of returns but nearly 50% of income tax paid. At the national level, almost half of all income tax paid is paid by high income earners. Letting the Bush tax cuts expire only for individuals above this income level would push these ratios higher. Without more recent and better public data from the IRS, however, it is difficult to say exactly how much higher. Fact #2: 86% of returns with income over $200,000 and 84% of millionaire returns filed jointly compared to just 37% of returns at all income levels. Perhaps not surprisingly, most high income returns are much more likely to be jointly filed returns. There are two reasons why most high income returns are from joint returns. First, there are two earners in the household, and two incomes mean more overall household income. Second, joint fliers are older. Older fliers are more likely to be both married and in the high-income stage of their life. Accordingly, taxes on high income earners are also more likely to be taxes on married, older Americans. 1 Because tax returns are confidential, estimating tax liabilities resulting from President Obama's tax proposal at the state level are not possible.

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