Congressional analysts said Wednesday that the new capital-gains tax cut proposed by President Bush is tilted even more toward the wealthy than an earlier version, although it would do less to worsen the budget deficit. More than 83 percent of the direct benefit of the tax cut would go to those with incomes higher than $100,000 a year, according to a study by the non-partisan staff of the Joint Committee on Taxation.
The same staff estimated that 79.7 percent of the benefit from the cut Bush recommended last year would have gone to that upper-income group.
Last year's bill would have delivered 1 percent of the tax reduction to those with incomes under $20,000; this year's version earmarks 0.4 percent for that group.
The congressional staff report differs sharply from Treasury Department estimates of how a capital-gains cut would affect the federal deficit.
The Treasury Department projected the cut would raise tax collections every year, and by $12.5-billion in the 1990-95 period. But the panel's report forecast annual revenue losses after the first two years and losses totaling $11.4-billion over 1990-95. The committee had foreseen a $24.2-billion loss over six years from the bill that Bush backed a year ago.
The Treasury Department says a capital-gains cut would be such a shot in the arm for investment that the economy would boom, generating more than enough revenue to pay for the cut.
The top tax rate on capital gains income, or profits from selling stocks, bonds and real estate, would be cut for individuals to 19.6 percent from 33 percent under the Bush plan.
In Bush's previous proposal, he suggested a maximum rate of 15 percent initially on any investment that is held more than a year and that can't be depreciated.
The congressional report estimates that people with incomes higher than $75,000 a year, who file about 3 percent of all tax returns, would get 88 percent of the tax reduction. Their tax cuts would average $4,729.
At the lower end of the economic scale, those with incomes under $20,000, who file more than half of all tax returns, would get 0.4 percent of the tax reduction. Only 697,000 of those 55-million-plus taxpayers would be expected to have any capital gains; their tax reduction would average $86.
- Information from Reuters and the Washington Post was used in this report.