"WASHINGTON, Jan. 7 — Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study.
The study, by the nonpartisan Congressional Budget Office, also shows that tax rates for middle-income earners edged up in 2004, the most recent year for which data was available, while rates for people at the very top continued to decline."
Economists and tax analysts have long known that the biggest dollar value of Mr. Bush’s tax cuts goes to people at the very top income levels. One reason is that two of his signature measures, tax cuts on investment income and a steady reduction of estate taxes, overwhelmingly benefit the wealthiest households.
But the Congressional study offers additional insight because it incorporates information about what people paid in 2004, the first year in which taxpayers could take full advantage of the cuts on stock dividends and capital gains.
The study estimates that the effective federal income tax rate, which excludes payroll taxes for Social Security and Medicare, declined modestly for people in the middle- and lower-income categories.
Families in the middle fifth of annual earnings, who had average incomes of $56,200 in 2004, saw their average effective tax rate edge down to 2.9 percent in 2004 from 5 percent in 2000.
That translated to an average tax cut of $1,180 per household, but the tax rate actually increased slightly from 2003.
Tax cuts were much deeper, and affected far more money, for families in the highest income categories. Households in the top 1 percent of earnings, which had an average income of $1.25 million, saw their effective individual tax rates drop to 19.6 percent in 2004 from 24.2 percent in 2000.
The rate cut was twice as deep as for middle-income families, and it translated to an average tax cut of almost $58,000."
Tax Cuts Offer Most for Very Rich, Study Says - New York Times