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1 Arthur P. Hall, Analysis and Summary of the Contract With America Tax Relief Act of 1995 1 (1995)

handle is hein.taxfoundation/sregxz0001 and id is 1 raw text is: FOUN DAT ION March 1995 Number 46 Analysis and Surnny of the Contract With America TxR ii f Act of 1995 The tax provisions in the Contract With America, if enacted, will reduce Americans' tax burden by an estimated $ 188.8 billion over the five-year budget period from 1995 to 2000. At the same time, the provisions will slightly increase the share of the income tax burden bornc by those taxpayers with $75,000 or more of adjusted gross income, as Fire I and T'able I demonstrate. Figure 1 Share of Individual Income Jaxes Under Current Law and Proposed Contract Provisions, by Income (lass, 1995-2000 30.0% 0 0 * Current Law 25.000- D Proposed Law 20.0%. N 15.0% - ; . L3 ¢ 10.0%_ as o 5.0% - 0.0%- 6a. 6c 066) 6c) 6) 5.MI00o ) cl( 0 0 0 c0 53 0 5 o0 q -5.0% (n 0)u u-5 0 Table 2 reports estimates of how the Contract's tax reductions will be distrib- Utcd across different income groups. The estimated average tax reduction for all income tax filers amounts to $1,552 over the 1995 to 2000 time period. The only provision estimated to expose more tax- payer income to taxation is the American l)ream Savings Account (AI)SA). The as- stImption is that taxpayers will forego tax deductible contributions to other retire- nentt-type accounts in order to make non- deductible contributions to an ADS ac- count that permits tax-free money growth and tax-free withdrawals for specified ex- penditures like college tuition. In Table 2, the revenues raised from the ADS ac- counts offset the $500 million in estimat- ecl tax relief provided by the spousal IRA provision. Table -3 distributes the Contract's tax red uction across the different states. 7able 4 and Figure 2 show the net tax savings per income tax filer in each state. Connecticut, New Jersey, New York, Cali- fornia, and Massachusetts rank as the top five states in terms of per-filer tax savings, (The District of' (.olimbia would rank fourth if it were a state.) Alabama, Alas- ka, %Mississippi, South l)akota, and North l)akota rank as the bottom five states in terms of per-filer savings. In what follows, the key provisions of the Contract with America Tax Relief Act of' 1995 are described and summa- rized. Figure -3 illustrates how the net tax reduction measures are divided among the various titles of the Act. SO11fCC lix ;I OIIItldaiot). 13j' Arthur P. IlMll, PhDI). T[ifx Folulldatioln

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