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|
SPONSOR: |
Lujan |
DATE TYPED: |
|
HB |
167 |
||
|
SHORT TITLE: |
Reduce Income Tax Rates |
SB |
|
||||
|
|
ANALYST: |
Smith |
|||||
REVENUE
|
Estimated Revenue |
Recurring or
Non-Rec |
Fund Affected |
|||
|
FY04 |
FY05 |
FY06 |
FY07 |
|
|
|
(17,110.0) |
(56,909.0) |
(151,058.0) |
(299,293.0) |
Recurring |
Rate
Cut |
|
(4,176.0) |
(10,297.0) |
(15,622.0) |
(25,844.0) |
Recurring |
Capital
Gains Cut |
|
(21,286.0) |
(67,206.0) |
(166,680.0) |
(325,137.0) |
Recurring |
Total
General Fund |
|
|
|
|
|
|
|
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates SB 167
Responses
Received From
TRD
SUMMARY
Synopsis
of Bill
House Bill 167 would
reduce
·
In
tax year 2003: 7.7%;
·
In
tax year 2004: 7.0%;
·
In
tax year 2005: 6.0%; and
·
In
tax year 2006 and after: 5.0%.
Beginning in tax year
2003, taxpayers would be able to deduct the greater of $1,000 or the following
percentage of their net capital gain income:
·
In
tax year 2003: 10%;
·
In
tax year 2004: 20%;
·
In
tax year 2005: 30%; and
·
In
tax years 2006 and after: 50%.
Significant
Issues
TRD has supplied the following rate tables.
Current and Proposed Personal Income Tax Rates
|
Current |
Joint |
Single |
Separate |
Head of Household |
||||
|
|
Taxable Income |
Taxable Income |
Taxable Income |
Taxable Income |
||||
|
Rate (%) |
From |
to |
From |
to |
From |
to |
From |
to |
|
1.7 |
0 |
8,000 |
0 |
5,500 |
0 |
4,000 |
0 |
7,000 |
|
3.2 |
8,001 |
16,000 |
5,501 |
11,000 |
4,001 |
8,000 |
7,001 |
14,000 |
|
4.7 |
16,001 |
24,000 |
11,001 |
16,000 |
8,001 |
12,000 |
14,001 |
20,000 |
|
6 |
24,001 |
40,000 |
16,001 |
26,000 |
12,001 |
20,000 |
20,001 |
33,000 |
|
7.1 |
40,001 |
64,000 |
26,001 |
42,000 |
20,001 |
32,000 |
33,001 |
53,000 |
|
7.9 |
64,001 |
100,000 |
42,001 |
65,000 |
32,001 |
50,000 |
53,001 |
83,000 |
|
8.2 |
101,000 |
& above |
65,001 |
& above |
50,001 |
& above |
83,001 |
& above |
|
|
|
|
|
|
|
|
|
|
|
Proposed |
Joint |
Single |
Separate |
Head of Household |
||||
|
Tax Year 2003 |
Taxable Income |
Taxable Income |
Taxable Income |
Taxable Income |
||||
|
Rate (%) |
From |
to |
From |
to |
From |
to |
From |
to |
|
1.7 |
0 |
8,000 |
0 |
5,500 |
0 |
4,000 |
0 |
7,000 |
|
3.2 |
8,001 |
16,000 |
5,501 |
11,000 |
4,001 |
8,000 |
7,001 |
14,000 |
|
4.7 |
16,001 |
24,000 |
11,001 |
16,000 |
8,001 |
12,000 |
14,001 |
20,000 |
|
6 |
24,001 |
40,000 |
16,001 |
26,000 |
12,001 |
20,000 |
20,001 |
33,000 |
|
7.1 |
40,001 |
64,000 |
26,001 |
42,000 |
20,001 |
32,000 |
33,001 |
53,000 |
|
7.7 |
64,001 |
& above |
42,001 |
& above |
32,001 |
& above |
53,001 |
& above |
|
|
|
|
|
|
|
|
|
|
|
Proposed |
Joint |
Single |
Separate |
Head of Household |
||||
|
Tax Year 2004 |
Taxable Income |
Taxable Income |
Taxable Income |
Taxable Income |
||||
|
Rate (%) |
From |
to |
From |
to |
From |
to |
From |
to |
|
1.7 |
0 |
8,000 |
0 |
5,500 |
0 |
4,000 |
0 |
7,000 |
|
3.2 |
8,001 |
16,000 |
5,501 |
11,000 |
4,001 |
8,000 |
7,001 |
14,000 |
|
4.7 |
16,001 |
24,000 |
11,001 |
16,000 |
8,001 |
12,000 |
14,001 |
20,000 |
|
6 |
24,001 |
40,000 |
16,001 |
26,000 |
12,001 |
20,000 |
20,001 |
33,000 |
|
7 |
40,001 |
& above |
26,001 |
& above |
20,001 |
& above |
33,001 |
& above |
|
|
|
|
|
|
|
|
|
|
|
Proposed |
Joint |
Single |
Separate |
Head of Household |
||||
|
Tax Year 2005 |
Taxable Income |
Taxable Income |
Taxable Income |
Taxable Income |
||||
|
Rate (%) |
From |
to |
From |
to |
From |
to |
From |
to |
|
1.7 |
0 |
8,000 |
0 |
5,500 |
0 |
4,000 |
0 |
7,000 |
|
3.2 |
8,001 |
16,000 |
5,501 |
11,000 |
4,001 |
8,000 |
7,001 |
14,000 |
|
4.7 |
16,001 |
24,000 |
11,001 |
16,000 |
8,001 |
12,000 |
14,001 |
20,000 |
|
6 |
24,001 |
& above |
16,001 |
& above |
12,001 |
& above |
20,001 |
& above |
|
|
|
|
|
|
|
|
|
|
|
Proposed |
Joint |
Single |
Separate |
Head of Household |
||||
|
Tax Year 2006 |
Taxable Income |
Taxable Income |
Taxable Income |
Taxable Income |
||||
|
Rate (%) |
From |
to |
From |
to |
From |
to |
From |
to |
|
1.7 |
0 |
8,000 |
0 |
5,500 |
0 |
4,000 |
0 |
7,000 |
|
3.2 |
8,001 |
16,000 |
5,501 |
11,000 |
4,001 |
8,000 |
7,001 |
14,000 |
|
4.7 |
16,001 |
24,000 |
11,001 |
16,000 |
8,001 |
12,000 |
14,001 |
20,000 |
|
5 |
24,001 |
& above |
16,001 |
& above |
12,001 |
& above |
20,001 |
& above |
FISCAL IMPLICATIONS
The impacts of the
capital gains deduction are evaluated under the proposed tax rates. If the tax rate changes are not adopted, the
impacts of the capital gains provisions compared to present law tax rates would
be larger. Further, capital gains
realization levels have been suppressed by recent stock market performance.
While a “bounce” back to the levels of the late 1990’s is not anticipated, it
should be noted that realizations are notoriously volatile and difficult to
forecast.
OTHER SUBSTANTIVE ISSUES
TRD
notes that state income tax payments are deductible for purposes of calculating
federal income tax. Thus, because this
proposal would reduce state income tax liabilities, it would also reduce these
deductions. This reduces the net
benefits of the tax reduction for the taxpayer.
For example, if a taxpayer is in the 30% tax bracket, the net benefit to
the taxpayer of the state tax reduction would be reduced by 30%.
TRD has provided the
following table that shows who reaps the benefit of
the income tax cut by income class and filing status.
|
Effects of Proposed Tax
Reduction by Taxable Income and Filing Status |
||||||||||||||
|
|
Tax Year 2003 |
Tax Year 2004 |
Tax Year 2005 |
Tax Year 2006 |
||||||||||
|
Filing
Status |
Present Law Liability * |
Proposed Law Liability* |
Decrease
in Tax Liability * |
Present Law Liability * |
Proposed Law Liability* |
Decrease
in Tax Liability * |
Present Law Liability * |
Proposed Law Liability* |
Decrease
in Tax Liability * |
Present Law Liability * |
Proposed Law Liability* |
Decrease
in Tax Liability * |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Married
Filing Joint |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Taxable
Income ($) |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
0
to 8,000 |
2.0 |
2.0 |
(0.0) |
2.1 |
2.1 |
0.0 |
2.2 |
2.2 |
(0.0) |
2.3 |
2.3 |
(0.0) |
||
|
8,001
to 16,000 |
9.4 |
9.4 |
(0.0) |
10.0 |
10.0 |
0.0 |
10.7 |
10.7 |
(0.0) |
11.5 |
11.5 |
(0.0) |
||
|
16,001
to 24,000 |
18.2 |
18.2 |
(0.0) |
19.6 |
19.6 |
0.0 |
21.0 |
21.0 |
(0.0) |
22.6 |
22.6 |
(0.0) |
||
|
24,001
to 40,000 |
76.2 |
76.2 |
(0.0) |
81.4 |
81.4 |
(0.0) |
86.9 |
86.9 |
(0.0) |
92.9 |
82.8 |
(10.2) |
||
|
40,001
to 64,000 |
159.2 |
159.1 |
(0.0) |
169.3 |
167.9 |
(1.4) |
179.7 |
167.4 |
(12.3) |
191.2 |
153.8 |
(37.4) |
||
|
64,001
to 100,000 |
165.9 |
164.5 |
(1.4) |
175.7 |
167.7 |
(8.0) |
185.7 |
159.5 |
(26.3) |
196.7 |
143.9 |
(52.8) |
||
|
100,001 and over |
291.7 |
280.4 |
(11.3) |
306.4 |
273.5 |
(32.9) |
321.5 |
250.6 |
(70.9) |
337.8 |
221.4 |
(116.4) |
||
|
Total |
722.5 |
709.8 |
(12.7) |
764.4 |
722.1 |
(42.3) |
807.8 |
696.6 |
(111.2) |
855.1 |
638.4 |
(216.8) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Single |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Taxable
Income ($) |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
0
to 5,500 |
5.6 |
5.6 |
(0.0) |
5.9 |
5.9 |
0.0 |
6.3 |
6.3 |
0.0 |
6.7 |
6.7 |
- |
||
|
5,500 to 11,000 |
19.5 |
19.5 |
(0.0) |
20.9 |
20.9 |
0.0 |
22.4 |
22.4 |
0.0 |
24.2 |
24.2 |
0.0 |
||
|
11,000 to 16,000 |
27.9 |
27.9 |
(0.0) |
29.8 |
29.8 |
(0.0) |
31.8 |
31.8 |
(0.0) |
34.1 |
34.1 |
0.0 |
||
|
16,000
to 26,000 |
57.1 |
57.1 |
(0.0) |
60.8 |
60.8 |
(0.0) |
64.7 |
60.5 |
(4.2) |
68.9 |
52.9 |
(16.0) |
||
|
26,000
to 42,000 |
47.2 |
47.2 |
0.0 |
50.0 |
47.8 |
(2.2) |
52.9 |
45.9 |
(7.1) |
56.2 |
41.5 |
(14.6) |
||
|
42,000
to 65,000 |
27.2 |
26.3 |
(0.9) |
28.7 |
26.4 |
(2.2) |
30.2 |
24.6 |
(5.6) |
31.9 |
22.0 |
(9.9) |
||
|
65,000 and over |
48.2 |
46.0 |
(2.2) |
50.5 |
44.4 |
(6.1) |
52.9 |
40.4 |
(12.5) |
55.5 |
35.5 |
(20.0) |
||
|
Total |
232.7 |
229.5 |
(3.2) |
246.8 |
236.1 |
(10.7) |
261.3 |
231.9 |
(29.4) |
277.4 |
216.8 |
(60.7) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Separate |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Taxable
Income ($) |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
0 to
4,000 |
0.0 |
0.0 |
- |
0.0 |
0.0 |
- |
0.0 |
0.0 |
- |
0.0 |
0.0 |
- |
||
|
4,000 to
8,000 |
0.1 |
0.1 |
- |
0.1 |
0.1 |
- |
0.1 |
0.1 |
- |
0.1 |
0.1 |
- |
||
|
8,000 to 12,000 |
0.2 |
0.2 |
- |
0.3 |
0.3 |
- |
0.3 |
0.3 |
- |
0.3 |
0.3 |
(0.0) |
||
|
12,000
to 20,000 |
1.0 |
1.0 |
- |
1.1 |
1.1 |
(0.0) |
1.1 |
1.1 |
(0.0) |
1.2 |
1.1 |
(0.1) |
||
|
20,000
to 32,000 |
1.8 |
1.8 |
- |
1.9 |
1.9 |
(0.0) |
2.0 |
1.8 |
(0.1) |
2.1 |
1.7 |
(0.4) |
||
|
32,000
to 50,000 |
1.8 |
1.7 |
(0.0) |
1.9 |
1.8 |
(0.1) |
2.0 |
1.7 |
(0.3) |
2.1 |
1.5 |
(0.6) |
||
|
50,000 and over |
6.3 |
6.0 |
(0.3) |
6.6 |
5.8 |
(0.8) |
6.9 |
5.3 |
(1.6) |
7.2 |
4.6 |
(2.6) |
||
|
Total |
11.2 |
10.9 |
(0.3) |
11.8 |
10.9 |
(0.9) |
12.4 |
10.4 |
(2.1) |
13.1 |
9.4 |
(3.7) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Head
of Household |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Taxable
Income ($) |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
0 to
7,000 |
1.7 |
1.7 |
(0.0) |
1.8 |
1.8 |
0.0 |
1.9 |
1.9 |
(0.0) |
2.0 |
2.0 |
(0.0) |
||
|
7,000 to
14,000 |
4.7 |
4.7 |
(0.0) |
5.0 |
5.0 |
0.0 |
5.3 |
5.3 |
(0.0) |
5.7 |
5.7 |
(0.0) |
||
|
14,000 to 20,000 |
6.0 |
6.0 |
(0.0) |
6.5 |
6.5 |
0.0 |
7.0 |
7.0 |
(0.0) |
7.5 |
7.5 |
(0.0) |
||
|
20,000
to 33,000 |
11.5 |
11.5 |
(0.0) |
12.3 |
12.3 |
(0.0) |
13.1 |
13.1 |
0.0 |
14.0 |
12.6 |
(1.4) |
||
|
33,000
to 53,000 |
12.3 |
12.3 |
(0.0) |
13.1 |
13.0 |
(0.1) |
13.9 |
12.9 |
(1.0) |
14.8 |
11.9 |
(2.8) |
||
|
53,000
to 83,000 |
7.2 |
7.1 |
(0.1) |
7.6 |
7.2 |
(0.3) |
8.0 |
6.9 |
(1.1) |
8.5 |
6.2 |
(2.3) |
||
|
83,00 and over |
10.3 |
9.9 |
(0.4) |
10.8 |
9.6 |
(1.2) |
11.4 |
8.8 |
(2.6) |
11.9 |
7.8 |
(4.2) |
||
|
Total |
53.6 |
53.1 |
(0.5) |
57.0 |
55.4 |
(1.6) |
60.6 |
55.8 |
(4.8) |
64.4 |
53.6 |
(10.9) |
||
|
*
in $ Millions |
||||||||||||||
|
||||||||||||||
Additionally, TRD has provided analogous tables for the capital gains tax reduction.
Estimated
Distributional Impacts of the Capital Gains Proposal For Selected Years:
Tax
Year 2003
|
Adjusted Gross Income |
Net Capital Gains |
Increased Deductions |
Decreased Tax Liability |
|
|
|
(millions) |
(millions) |
(thousands) |
|
|
$0 or Less |
$10,000 |
$22.3 |
$0.0 |
$0.0 |
|
$10,000 |
$20,000 |
$15.0 |
$0.0 |
$0.0 |
|
$20,000 |
$30,000 |
$17.9 |
$0.0 |
$0.0 |
|
$30,000 |
$50,000 |
$45.0 |
$0.0 |
$0.0 |
|
$50,000 |
$75,000 |
$70.1 |
$0.0 |
$0.0 |
|
$75,000 |
$100,000 |
$70.1 |
$1.9 |
$129 |
|
$100,000 |
$150,000 |
$104.6 |
$4.9 |
$349 |
|
$150,000 |
$200,000 |
$69.5 |
$4.5 |
$314 |
|
$200,000 |
Over |
$541.5 |
$48.0 |
$3,384 |
|
|
Total |
$956.1 |
$59.3 |
$4,176 |
Tax
Year 2006
|
Adjusted Gross Income |
Net Capital Gains |
Increased Deductions |
Decreased Tax Liability |
|
|
|
(millions) |
(millions) |
(thousands) |
|
|
$0 or Less |
$10,000 |
$28.3 |
$10.6 |
$159 |
|
$10,000 |
$20,000 |
$19.1 |
$5.3 |
$92.3 |
|
$20,000 |
$30,000 |
$22.8 |
$7.2 |
$217 |
|
$30,000 |
$50,000 |
$57.1 |
$20.6 |
$874 |
|
$50,000 |
$75,000 |
$89.1 |
$35.3 |
$1,596 |
|
$75,000 |
$100,000 |
$89.1 |
$38.0 |
$1,779 |
|
$100,000 |
$150,000 |
$132.9 |
$59.4 |
$2,876 |
|
$150,000 |
$200,000 |
$88.3 |
$41.0 |
$1,983 |
|
$200,000 |
Over |
$688.0 |
$336.2 |
$16,267 |
|
|
Total |
$1,214.7 |
$553.6 |
$25,844 |
SS/ls