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1 Patrick Fleenor, Bottom Line on the Taxpayer Relief Act of 1997 1 (1997)

handle is hein.taxfoundation/srhbxz0001 and id is 1 raw text is: TAX01rffiW~r FOUNDATION September 1997, No. 71 Bottom Line on the Taxpayer Relief Act of 1997 Congress passed and President Clinton has signed the Taxpayer Relief Act of 1997. This is the first piece of legislation in 16 years to affect Americans' tax bills noticeably. Over the next five years Americans can expect taxes to be $95.3 billion lower than they otherwise would have been as a result of this legislation.' This translates to approximately $764 in tax savings for every individual income tax filer. Over 10 years these savings will climb to $275.4 billion, or roughly $2,136 for every filer. Before examining the new law in detail, it is important to put these changes in perspec- Figure 1 Per Filer Net Tax Cuts/Tax Hikes by Income Group, FY 1997-2002 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $-500 $-1000, $-1,500 $-2,000 under $15k- $25k- $35k $45k- $60k- $75k-$100k- over $15k $25k $35k -$45k $60k $75k $100k$200k$200k Note: Negative values represent tax cuts, positive values represent tax hikes. Source: Tax Foundation, tive. As stated above, over 10 years this legis- lation is projected to reduce federal revenues by $275.4 billion. Prior to enactment of this law the Federal government was expected to take in more than $19.0 trillion over the same period. The amount of enacted tax relief, therefore, represents about 1.4 percent of the taxes that would have been collected during this period. The Taxpayer Relief Act of 1997 Table 1 lists each section of the legislation as well as the effect that each is expected to have on federal revenues over the next five- and 10-year periods.2 Major subsections of the legislation, such as the education incen- tives and the new per-child tax credit, are fur- ther broken out so as to highlight major parts of the law. The table shows that the revenue reducing portions of the legislation are ex- pected to lower receipts to the Treasury by $151.7 billion over the next five years. These cuts, however, will be partially offset by other provisions in the legislation which are expect- ed to boost federal revenues by $56.4 billion during this period. Therefore, the net reve- nue reduction over five years is projected to total $95.3 billion. The table shows that over 10 years the legislation is projected to reduce federal revenues by $401.4 billion. These cuts would be partially offset by revenue in- creases which would bring in an additional $126.0 billion to the federal treasury. There- fore, the net revenue reduction from the legis- lation would be $275.4 billion over 10 years. Revenue Reducing Provisions Figures 2a and 2b show the composition of the revenue reductions over the five- and 10-year periods, respectively. These figures By Patrick Fleenor Economist Tax Foundation :)I f

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