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Civic Report
No. 43 August 2004


The $36 Billion Bonus
New York’s Gains from Federal Tax Cuts

Appendix A: Methodology

The estimates of direct individual tax impacts contained in this report were produced using a microsimulation model developed by the Manhattan Institute and Fiscal Economics, Inc. of Alexandria, Virginia. This model uses a large database of tax return data available from the Internal Revenue Service as well as information from the Congressional Budget Office, New York State Department of Taxation and Finance, and New York City to calculate all of the income and demographic variables needed to compute the federal income tax liabilities for statistically representative samples of the national, New York State, and New York City filing populations for each year out to 2014.

Once income and demographic data have been calculated for each observation in the samples, the model uses a tax calculation program to compute federal income tax liabilities under various regimes. Estimates of tax savings resulting from enactment of the Bush tax cuts, for example, were made by first computing a baseline estimate that assumed that federal tax law as it existed in 2000 had remained in place through 2010. These estimates were then compared against a policy estimate that took into account the various provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). Estimates of tax revenues and changes for future years are based on the baseline national economic projections used by the Congressional Budget Office.

Estimates of changes in tax liabilities resulting from enactment of the tax proposals put forward by John Kerry were made in a similar fashion. In this case, a baseline estimate was made by assuming that the tax law as it currently exists remains in place through 2010. This estimate was then compared against a policy estimate that assumed that the Kerry tax proposals were fully enacted into law.

Appendix B: Federal Personal Income Tax Brackets

PRE–2001 LAW

2004 LAW

Single

For taxable incomes between

tax rate is

For taxable incomes between     

tax rate is

0...

...29,050

15%

0...

...7,150

10%

29,050...

...70,350

28%

7,150...

...29,050

15%

70,350...

...146,750

31%

29,050...

...70,350

25%

146,750...

...319,100

36%

70,350...

...146,750

28%

Over 319,100

39.6%

146,750...

...319,100

33%

 

 

 

Over 319,100

35%

Married Filing Jointly

For taxable incomes between

tax rate is

For taxable incomes between     

tax rate is

0...

...48,500

15%

0...

...14,300

10%

48,500...

...117,250

28%

14,300...

...58,100

15%

117,250...

...178,650

31%

58,100...

...117,250

25%

178,650...

...319,100

36%

117,250...

...178,650

28%

Over 319,100

39.6%

178,650...

...319,100

33%

 

 

 

Over 319,100

35%

Married Filing Separately

For taxable incomes between

tax rate is

For taxable incomes between     

tax rate is

0...

...24,250

15%

0...

...7,150

10%

24,250...

...58,625

28%

7,150...

...24,250

15%

58,625...

...89,325

31%

24,250...

...58,625

25%

89,325...

...159,550

36%

58,625...

...89,325

28%

Over 159,550

39.6%

89,325...

...159,550

33%

 

 

 

Over 159,550

35%

Head of Household

For taxable incomes between

tax rate is

For taxable incomes between     

tax rate is

0...

...38,900

15%

0...

...10,000

10%

38,900...

...100,500

28%

10,000...

...38,900

15%

100,500...

...162,700

31%

38,900...

...100,500

25%

162,700

...319,100

36%

100,500...

...162,700

28%

Over 319,100

39.6%

162,700...

...319,100

33%

 

 

 

Over 319,100

35%

Income thresholds for 2001 are adjusted to estimated 2004 dollar levels.
Sources: Internal Revenue Service (pre-2001), Manhattan Institute estimate (2004)

 


Center for Civic Innovation.

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CR 43 PDF (142 kb)

WHAT THE PRESS SAID:

The Power of Good Ideas
New York Post, 8-26-04
The City That Conservatives Built
Gotham Gazette, 8-25-04

SUMMARY:
This study provides an Empire State perspective on federal income tax cuts enacted since 2001. Through 2004, New York State's share of the income tax cuts will total nearly $36 billion, including $15 billion in savings for New York City residents. In 2004 alone, tax cuts will amount to a 2.7% average boost in after-tax income for New York residents.  In addition, reductions in dividends and capital gains tax rates contributed to a strong rebound in stock prices in 2003, providing vital aid to the City's financial services sector. As a result, New York would be particularly hard-hit if Congress enacts a proposal by presidential candidate John Kerry to roll back marginal rate cuts and investment incentives for taxpayers earning more than $200,000.

TABLE OF CONTENTS:

Executive Summary

About the Author

INTRODUCTION

OVERVIEW OF ENACTED TAX CUTS

The Second Step

What New Yorkers Saved

Figure 1: New Yorkers’ Combined Savings from 2001 Federal Income Tax Cut

Figure 2: New Yorkers’ Combined Savings from 2001 and 2003 Federal Income Tax Cuts

Sample Families

Table 1: Impact of 2001 and 2003 Tax Cuts on Hypothetical Taxpayers

Indirect Effects

THE CHOICES AHEAD

Figure 3: New Yorkers’ Projected Federal Income Tax Savings With All Expiring JGTRRA Provisions Extended Through 2010

Figure 4: New Yorkers’ Projected Federal Income Tax Increases Under JGTRRA (as of 8/1/2004)

Figure 5: New Yorkers’ Projected Federal Income Tax Increases Under Kerry Proposals

CONCLUSION

APPENDICES

ENDNOTES

 


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