10-May-06
Cash Income
Percentile
2
Lowest Quintile
Second Quintile
Middle Quintile
Fourth Quintile
Top Quintile
All
Addendum
Top 10 Percent
Top 5 Percent
Top 1 Percent
Top 0.5 Percent
Top 0.1 Percent
PRELIMINARY RESULTS -- UPDATED
Table T06-0086
Conference Agreement on the Tax Increase Prevention and Reconciliation Act of 2005
Fully-Phased In Impact of Major Provisions at 2006 Income Levels
Distribution of Federal Tax Change by Cash Income Percentile
1
Percent of Tax Units
3
With Tax
Cut
With Tax
Increase
6.7
14.1
19.9
38.3
80.4
32.0
0.0
0.1
0.1
0.1
0.3
0.1
Percent
Change in
After-Tax
Income
4
0.0
0.0
0.1
0.2
1.5
0.9
Share of
Total
Federal Tax
Change
Average Federal Tax Change
Dollars Percent
0.0
0.3
0.9
5.2
93.6
100.0
0
-7
-20
-117
-2,119
-453
-0.1
-0.5
-0.4
-1.0
-4.4
-3.4
Share of Federal Taxes
Change (%
Points)
Under the
Proposal
0.0
0.1
0.2
0.4
-0.8
0.0
0.4
2.3
8.0
17.7
71.4
100.0
http://www.taxpolicycenter.org
Average Federal Tax Rate
5
Change (%
Points)
Under the
Proposal
0.0
0.0
-0.1
-0.2
-1.1
-0.7
3.3
7.5
14.4
18.5
24.4
20.6
91.9
96.2
95.4
96.8
99.6
0.4
0.6
0.4
0.1
0.0
1.8
1.9
1.7
1.9
2.4
79.8
64.0
31.1
26.1
18.5
-3,613
-5,797
-14,094
-23,608
-83,966
-4.8
-4.9
-4.0
-4.2
-4.8
-0.8
-0.7
-0.2
-0.2
-0.2
55.8
43.7
26.0
21.0
12.7
-1.3
-1.4
-1.2
-1.3
-1.6
25.7
26.9
29.1
29.8
31.3
Baseline Distribution of Income and Federal Taxes by Cash Income Percentile, 2006
1
Cash Income
Percentile
2
Lowest Quintile
Second Quintile
Middle Quintile
Fourth Quintile
Top Quintile
All
Number
(thousands)
28,703
29,289
29,279
29,283
29,282
146,417
Tax Units
3
Percent of
Total
19.6
20.0
20.0
20.0
20.0
100.0
Average
Income
(Dollars)
7,923
20,116
35,940
62,270
189,863
62,970
Average
Federal Tax
Burden
(Dollars)
265
1,513
5,180
11,614
48,401
13,418
Average
After-Tax
Income
4
(Dollars)
7,659
18,603
30,761
50,656
141,462
49,552
Average
Federal Tax
Rate
5
3.3
7.5
14.4
18.7
25.5
21.3
Share of Pre-
Tax Income
Percent of
Total
2.5
6.4
11.4
19.8
60.3
100.0
Share of Post-
Tax Income
Percent of
Total
3.0
7.5
12.4
20.5
57.1
100.0
Share of
Federal Taxes
Percent of
Total
0.4
2.3
7.7
17.3
72.1
100.0
Addendum
Top 10 Percent
Top 5 Percent
Top 1 Percent
Top 0.5 Percent
Top 0.1 Percent
14,642
7,323
1,464
732
146
10.0
5.0
1.0
0.5
0.1
281,205
421,832
1,159,675
1,825,082
5,274,153
75,989
119,075
351,130
567,752
1,734,728
205,216
302,757
808,546
1,257,330
3,539,426
27.0
28.2
30.3
31.1
32.9
44.7
33.5
18.4
14.5
8.4
41.4
30.6
16.3
12.7
7.1
56.6
44.4
26.2
21.2
12.9
Source: Urban-Brookings Tax Policy Center Microsimulation Model (version 0305-3A).
(1) Calendar year. Provisions include: increase the individual alternative minimum tax (AMT) exemption to $62,550 for married couples filing a joint return, $42,500 for singles and heads of household, and $31,275 for married individuals filing a separate return; allow personal non-refundable credits against the regular tax and AMT, regardless of tentative AMT; extend the reduction in the tax rate on qualifying dividends and long-term capital gains to 15 percent (the rate for individuals in the 10- and 15-percent brackets would be 0 percent); section 179 expensing provisions. Also includes the present value of the tax savings from the Roth IRA conversion provision. Because of the ability to convert non-deductible IRAs to Roths, we model the provision as effectively removing the income limitation on contributions to Roth IRAs. The amount of conversion activity has been calibrated to match the revenue estimate from the Joint Committee on Taxation dated March 1, 2006 and published at http://www.cbpp.org/4-25-06tax.htm. Baseline is current law without the provisions described above that are already in place for 2006.
(2) Tax units with negative cash income are excluded from the lowest quintile but are included in the totals. For a description of cash income, see http://www.taxpolicycenter.org/TaxModel/income.cfm
(3) Includes both filing and non-filing units. Tax units that are dependents of other taxpayers are excluded from the analysis.
(4) After-tax income is cash income less: individual income tax net of refundable credits; corporate income tax; payroll taxes (Social Security and Medicare); and estate tax.
(5) Average federal tax (includes individual and corporate income tax, payroll taxes for Social Security and Medicare, and the estate tax) as a percentage of average cash income.