THOMAS A BARTHOLD CHIEF OF STAFF

SENATE HOUSE BERNARD A SCHMITT DEPUTY CHIEF OF STAFF

112TH CONGRESS 2nd SESSION

MAX BAUCUS MONTANA DAVE CAMP MICHIGAN CHAIRMAN

JOHN D ROCKEFELLER IV WEST VIRGINIA KENT CONRAD NORTH DAKOTA ORRIN G HATCH UTAH

VICE CHAIRMAN WALLY HERGER CALIFORNIA SAM JOHNSON TEXAS SANDER M LEVIN MICHIGAN

CCongre~~ of tue illniteb f$tate~ CHUCK GRASSLEY IOWA CHARLES B RANGEL NEW YORK JOINT COMMITTEE ON TAXATION

1625 LONGWORTH HOUSE OFFICE BUILDING

WASHINGTON DC 20515-6453

(202) 225-3621 httpwWWjctgov

OCT 1 1 2012 Honorable Max Baucus United States Senate SH-511 Washington DC 20510

Honorable Orrin G Hatch United States Senate Sh-l04 Washington DC 20510

Dear Chainnan Baucus and Senator Hatch

On September 19 2012 Chainnan Baucus convened a meeting of the members of the Senate Committee on Finance to discuss the alternative minimum tax and provisions of the Internal Revenue Code that have either expired over the past year or are about to expire During that meeting Chainnan Baucus asked what could be said about the concept of repealing all tax expenditures and using all or part of the revenues to reduce statutory marginal tax rates I reported the preliminary results of an experiment that I had designed as a preliminary first step towards answering such a question I promised the Committee members that after my colleagues and I had double checked our work I would provide a written description of the experiment and the results to all of the members of the Committee

The general approach of the experiment was to assume the repeal ofa number of the largest tax expenditures under the individual income tax as identified in our publication Estimates ofFederal Tax Expenditures for Fiscal Years 2011 -2015 (JCS-I-12) and use the resulting revenue raised to reduce the statutory rates of the individual income tax while also repealing the individual alternative minimum tax and the PEP and Pease limitations The result was to be approximately revenue neutral over the 10-year budget period 2013-2022

The experiment would make several changes to present law These changes include (a) repealing the individual alternative minimum tax (b) repealing the overall limitation on itemized deductions and personal exemptions for certain taxpayers (c) repealing all itemized deductions (d) taxing capital gains (and dividends) as ordinary income and (e) repealing the interest exclusion on State and local bonds issued after December 31 2012 No transition relief would be provided under any repeal

The itemized deductions taxing income from capital gain realizations at preferential rates and the interest exclusion on State and local bonds each are large tax expenditure provisions Other large tax expenditure provisions that I did not include in this experiment

ltCongress of tbe Wntteb ~tates JOINT COMMITTEE ON TAXATION

~a5btnllton m~ 20515-6453

Honorable Max Baucus Page 2 Honorable Orrin G Hatch United States Senate

include the earned income tax credit the child credit the exclusion of employer provided and self-employed health benefits and the present law treatment of various forms of retirement income and pension plans I did not include health and retirement because of the complexity of the analysis modifYing such provisions would require and in the interest of keeping the experiment somewhat simple Regarding the earned income tax credit and the child credit for the experiment I assumed that the provisions ofEGTRRA and ARRA that modifY the earned income tax credit and the child tax credit would be made permanent There are a significant number of other identified individual income tax expenditures or other possible base broadening policies that I did not include in this experiment

The Joint Committee staff estimated these changes relative to the present-law baseline That is the tax rates for the individual income tax in 2013 and beyond are 15 percent 28 percent 31 percent 36 percent and 396 percent There is no AMT patch under the presentshylaw baseline and the PEP and Pease provisions are part of the present law baseline The Joint Committee staff used its conventional modeling to estimate the provisions described above and used the resulting net revenues gained over the budget period to estimate an equal percentage decrease for all tax rates on ordinary income that would make the package roughly revenue neutral for the fiscal year 2013-2022 period The revenue-neutral tax reform package outlined above would permit a four-percent decrease in all ordinary income tax rates Under the proposal the individual income tax rates would be 144 percent 2688 percent 2976 percent 3456 percent and 3802 percent

I enclose table 12-2 155 which provides the estimated revenue effects of the different components of the experiment I also enclose a distributional analysis of this proposal (table Dshy12-15) As is the case for the revenue analysis the distributional analysis compares the policy of the experiment to that of the present-law baseline

Q[ongreuu of tbe Itntteb ~tateu JOINT COMMITIEE ON TAXATION

~asbtngton till[ 20515-6453

Honorable Max Baucus Page 3 Honorable Orrin O Hatch United States Senate

I hope this infonnation is useful I would be pleased to discuss this material further with you

Thomas A Barthold

Enclosures Tables 12-2 155 and D-12-15

cc Honorable Jeff Bingaman Honorable Richard Burr Honorable Maria Cantwell Honorable Benjamin L Cardin Honorable Thomas R Carper Honorable Tom Coburn Honorable Kent Conrad Honorable John Comyn Honorable Mike Crapo Honorable Michael B Enzi Honorable Chuck Grassley Honorable John F Kerry Honorable Jon Kyl Honorable Robert Menendez Honorable Bill Nelson Honorable Pat Roberts Honorable John D Rockefeller IV Honorable Charles E Schumer Honorable Olympia J Snowe Honorable Debbie Stabenow Honorable John Thune and Honorable Ron Wyden Russ Sullivan Lily Batchelder Chris Campbell Mark Prater

1)12middot15 October 9 2012

DISTRIBunONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2013

CHANGE IN FEDERAL TAXES (3) FEDERAL TAXES (3) Average Tax Rate (4) INCOME FEDERAL UNDER UNDER Present

CATEGORY (2) TAXES (3) PRESENT LAW PROPOSAL Law Proposal Millions Percent Billions Percent Billions Percent Percent Percent

Less than $10000 $1239 middot190 $7 03 $5 02 85 71 $10000 to $20000 $6511 s14 $11 04 $4 02 40 1600 $20000 to $30000 middot$7249 middot187 $39 16 $31 13 81 66 $30000 to $40000 $6858 middot105 $65 27 $58 24 113 102 $40000 to $50000 $5390 s4 $84 35 $79 33 128 122 $50000 to $75000 $4986 middot20 $254 106 $249 103 151 150 $75000 to $100000 $1343 05 $264 110 $262 109 173 174

$100000 to $200000 $11705 16 $729 305 $741 307 224 231 $200000 to $500000 $9652 23 $421 176 $430 178 278 290 $500000 to $1000000 $4590 29 $159 67 $164 68 317 336 $1000000 and over $25566 71 $362 151 $388 161 314 369 Total All Taxpayers $17836 07 $2394 1000 $2412 1000 205 211 I

Source Joint Committee on Taxation Detal may not add to total due to rounding

(1) The proposallllOud (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (e) permanently extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal aU itemized deductions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce all individual income tax rates by four percent Under the proposal the marginal income tax rates for individuals IIIOud be 1440 2688 2976 3456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus (1) taxexempt interest (2) employer contributions for heaHh plans and life insurance (3) employer share of FICA tax [4) worke(s compensation (5) nontaxable Social Security benefits (6) insurance value of Medicare benefits (7) alternative minimum tax preference items and 18) exduded income of US citizens living abroad Categories are measured at 2011 levels

(3) Federal taxes are equal to individual income tax (induding the outlay portion of refundable credits) employment tax (attributed to employees) and excise taxes (attributed to consumers) Corporate income tax is not induded due to uncertainty concerning the incidence of the tax Individuals who are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis Does not include indired effects

(4) The average tax rate is equal to Federal taxes described in foomote (3) divided by income described in foolnote (2)

Page 1

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAl THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2015

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

FEDERAL TAXES (3) UNDER

PRESENT LAW

FEDERAL TAXES (3) UNDER

PROPOSAL

Averaae Tax Rate (4) Present

Law Proposal Millions Percent BUlions Percent Billions Percent Percent Percent

Less than $10000 -$1441 -245 $6 02 $4 02 74 57 $10000 to $20000 -$6729 -898 $7 03 $1 (5) 26 03 $20000 to $30000 -$7669 -235 $33 12 $25 09 65 50 $30000 to $40000 -$7163 -107 $67 24 $60 22 105 94 $40000 to $50000 -$5449 -59 $93 34 $87 32 127 121 $50000 to $75000 -$5301 -18 $291 106 $286 103 153 152 $75000 to $100000 -$2488 -08 $307 112 $305 110 178 179

$100000 to $200000 $7131 09 $826 300 $833 302 228 234 $200000 to $500000 $4821 10 $486 176 $491 178 283 293 $500000 to $1000000 $4081 22 $185 67 $189 69 318 338 $1000000 and over $25670 57 $454 165 $480 174 312 370 Total All Taxpayersbullbullbullbullbullbull $5464 02 $2754 1000 $2759 1000 208 214 Source Joint Committee on Taxation

Detail may not add to total due to rounding

(1) The proposallNOUld (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanently extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal all itemized deductions (e) repeal the interest exdusiOn for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce aI individual income tax rates by four percent Under the

proposal the marginal income tax rates for individuals INOUId be 1440268829763456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross Income (AGI) plus [1) tax-exempt interest

(2) employer contributions for health plans and life insurance [3) employer share of FICA tax (4) workers compensation

(5) nontaxable Social Security benefits (6) insurance value of Medicare benefits [7) aHemative minimum tax preference items and

(8) exduded income oIUS citizens living abroad Categories are measured al2011 levels

(3) Federal taxes are equal to individual income tax (indudlng the outlay portion of refundable credits) employment tax (atlributed to employees)

and excise taxes (attributed to consumers) Corporate income tax is not included due to uncertainty concerning the incidence of the tax

Individuals IIo1ho are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis

Does not include indirect effects (4) The average tax rate is equal to Federal taxes described in footnote (3) divided by income desclibed in footnote (2)

Page 2

ltCongress of tbe Wntteb ~tates JOINT COMMITTEE ON TAXATION

~a5btnllton m~ 20515-6453

Honorable Max Baucus Page 2 Honorable Orrin G Hatch United States Senate

include the earned income tax credit the child credit the exclusion of employer provided and self-employed health benefits and the present law treatment of various forms of retirement income and pension plans I did not include health and retirement because of the complexity of the analysis modifYing such provisions would require and in the interest of keeping the experiment somewhat simple Regarding the earned income tax credit and the child credit for the experiment I assumed that the provisions ofEGTRRA and ARRA that modifY the earned income tax credit and the child tax credit would be made permanent There are a significant number of other identified individual income tax expenditures or other possible base broadening policies that I did not include in this experiment

The Joint Committee staff estimated these changes relative to the present-law baseline That is the tax rates for the individual income tax in 2013 and beyond are 15 percent 28 percent 31 percent 36 percent and 396 percent There is no AMT patch under the presentshylaw baseline and the PEP and Pease provisions are part of the present law baseline The Joint Committee staff used its conventional modeling to estimate the provisions described above and used the resulting net revenues gained over the budget period to estimate an equal percentage decrease for all tax rates on ordinary income that would make the package roughly revenue neutral for the fiscal year 2013-2022 period The revenue-neutral tax reform package outlined above would permit a four-percent decrease in all ordinary income tax rates Under the proposal the individual income tax rates would be 144 percent 2688 percent 2976 percent 3456 percent and 3802 percent

I enclose table 12-2 155 which provides the estimated revenue effects of the different components of the experiment I also enclose a distributional analysis of this proposal (table Dshy12-15) As is the case for the revenue analysis the distributional analysis compares the policy of the experiment to that of the present-law baseline

Q[ongreuu of tbe Itntteb ~tateu JOINT COMMITIEE ON TAXATION

~asbtngton till[ 20515-6453

Honorable Max Baucus Page 3 Honorable Orrin O Hatch United States Senate

I hope this infonnation is useful I would be pleased to discuss this material further with you

Thomas A Barthold

Enclosures Tables 12-2 155 and D-12-15

cc Honorable Jeff Bingaman Honorable Richard Burr Honorable Maria Cantwell Honorable Benjamin L Cardin Honorable Thomas R Carper Honorable Tom Coburn Honorable Kent Conrad Honorable John Comyn Honorable Mike Crapo Honorable Michael B Enzi Honorable Chuck Grassley Honorable John F Kerry Honorable Jon Kyl Honorable Robert Menendez Honorable Bill Nelson Honorable Pat Roberts Honorable John D Rockefeller IV Honorable Charles E Schumer Honorable Olympia J Snowe Honorable Debbie Stabenow Honorable John Thune and Honorable Ron Wyden Russ Sullivan Lily Batchelder Chris Campbell Mark Prater

1)12middot15 October 9 2012

DISTRIBunONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2013

CHANGE IN FEDERAL TAXES (3) FEDERAL TAXES (3) Average Tax Rate (4) INCOME FEDERAL UNDER UNDER Present

CATEGORY (2) TAXES (3) PRESENT LAW PROPOSAL Law Proposal Millions Percent Billions Percent Billions Percent Percent Percent

Less than $10000 $1239 middot190 $7 03 $5 02 85 71 $10000 to $20000 $6511 s14 $11 04 $4 02 40 1600 $20000 to $30000 middot$7249 middot187 $39 16 $31 13 81 66 $30000 to $40000 $6858 middot105 $65 27 $58 24 113 102 $40000 to $50000 $5390 s4 $84 35 $79 33 128 122 $50000 to $75000 $4986 middot20 $254 106 $249 103 151 150 $75000 to $100000 $1343 05 $264 110 $262 109 173 174

$100000 to $200000 $11705 16 $729 305 $741 307 224 231 $200000 to $500000 $9652 23 $421 176 $430 178 278 290 $500000 to $1000000 $4590 29 $159 67 $164 68 317 336 $1000000 and over $25566 71 $362 151 $388 161 314 369 Total All Taxpayers $17836 07 $2394 1000 $2412 1000 205 211 I

Source Joint Committee on Taxation Detal may not add to total due to rounding

(1) The proposallllOud (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (e) permanently extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal aU itemized deductions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce all individual income tax rates by four percent Under the proposal the marginal income tax rates for individuals IIIOud be 1440 2688 2976 3456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus (1) taxexempt interest (2) employer contributions for heaHh plans and life insurance (3) employer share of FICA tax [4) worke(s compensation (5) nontaxable Social Security benefits (6) insurance value of Medicare benefits (7) alternative minimum tax preference items and 18) exduded income of US citizens living abroad Categories are measured at 2011 levels

(3) Federal taxes are equal to individual income tax (induding the outlay portion of refundable credits) employment tax (attributed to employees) and excise taxes (attributed to consumers) Corporate income tax is not induded due to uncertainty concerning the incidence of the tax Individuals who are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis Does not include indired effects

(4) The average tax rate is equal to Federal taxes described in foomote (3) divided by income described in foolnote (2)

Page 1

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAl THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2015

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

FEDERAL TAXES (3) UNDER

PRESENT LAW

FEDERAL TAXES (3) UNDER

PROPOSAL

Averaae Tax Rate (4) Present

Law Proposal Millions Percent BUlions Percent Billions Percent Percent Percent

Less than $10000 -$1441 -245 $6 02 $4 02 74 57 $10000 to $20000 -$6729 -898 $7 03 $1 (5) 26 03 $20000 to $30000 -$7669 -235 $33 12 $25 09 65 50 $30000 to $40000 -$7163 -107 $67 24 $60 22 105 94 $40000 to $50000 -$5449 -59 $93 34 $87 32 127 121 $50000 to $75000 -$5301 -18 $291 106 $286 103 153 152 $75000 to $100000 -$2488 -08 $307 112 $305 110 178 179

$100000 to $200000 $7131 09 $826 300 $833 302 228 234 $200000 to $500000 $4821 10 $486 176 $491 178 283 293 $500000 to $1000000 $4081 22 $185 67 $189 69 318 338 $1000000 and over $25670 57 $454 165 $480 174 312 370 Total All Taxpayersbullbullbullbullbullbull $5464 02 $2754 1000 $2759 1000 208 214 Source Joint Committee on Taxation

Detail may not add to total due to rounding

(1) The proposallNOUld (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanently extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal all itemized deductions (e) repeal the interest exdusiOn for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce aI individual income tax rates by four percent Under the

proposal the marginal income tax rates for individuals INOUId be 1440268829763456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross Income (AGI) plus [1) tax-exempt interest

(2) employer contributions for health plans and life insurance [3) employer share of FICA tax (4) workers compensation

(5) nontaxable Social Security benefits (6) insurance value of Medicare benefits [7) aHemative minimum tax preference items and

(8) exduded income oIUS citizens living abroad Categories are measured al2011 levels

(3) Federal taxes are equal to individual income tax (indudlng the outlay portion of refundable credits) employment tax (atlributed to employees)

and excise taxes (attributed to consumers) Corporate income tax is not included due to uncertainty concerning the incidence of the tax

Individuals IIo1ho are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis

Does not include indirect effects (4) The average tax rate is equal to Federal taxes described in footnote (3) divided by income desclibed in footnote (2)

Page 2

Q[ongreuu of tbe Itntteb ~tateu JOINT COMMITIEE ON TAXATION

~asbtngton till[ 20515-6453

Honorable Max Baucus Page 3 Honorable Orrin O Hatch United States Senate

I hope this infonnation is useful I would be pleased to discuss this material further with you

Thomas A Barthold

Enclosures Tables 12-2 155 and D-12-15

cc Honorable Jeff Bingaman Honorable Richard Burr Honorable Maria Cantwell Honorable Benjamin L Cardin Honorable Thomas R Carper Honorable Tom Coburn Honorable Kent Conrad Honorable John Comyn Honorable Mike Crapo Honorable Michael B Enzi Honorable Chuck Grassley Honorable John F Kerry Honorable Jon Kyl Honorable Robert Menendez Honorable Bill Nelson Honorable Pat Roberts Honorable John D Rockefeller IV Honorable Charles E Schumer Honorable Olympia J Snowe Honorable Debbie Stabenow Honorable John Thune and Honorable Ron Wyden Russ Sullivan Lily Batchelder Chris Campbell Mark Prater

1)12middot15 October 9 2012

DISTRIBunONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2013

CHANGE IN FEDERAL TAXES (3) FEDERAL TAXES (3) Average Tax Rate (4) INCOME FEDERAL UNDER UNDER Present

CATEGORY (2) TAXES (3) PRESENT LAW PROPOSAL Law Proposal Millions Percent Billions Percent Billions Percent Percent Percent

Less than $10000 $1239 middot190 $7 03 $5 02 85 71 $10000 to $20000 $6511 s14 $11 04 $4 02 40 1600 $20000 to $30000 middot$7249 middot187 $39 16 $31 13 81 66 $30000 to $40000 $6858 middot105 $65 27 $58 24 113 102 $40000 to $50000 $5390 s4 $84 35 $79 33 128 122 $50000 to $75000 $4986 middot20 $254 106 $249 103 151 150 $75000 to $100000 $1343 05 $264 110 $262 109 173 174

$100000 to $200000 $11705 16 $729 305 $741 307 224 231 $200000 to $500000 $9652 23 $421 176 $430 178 278 290 $500000 to $1000000 $4590 29 $159 67 $164 68 317 336 $1000000 and over $25566 71 $362 151 $388 161 314 369 Total All Taxpayers $17836 07 $2394 1000 $2412 1000 205 211 I

Source Joint Committee on Taxation Detal may not add to total due to rounding

(1) The proposallllOud (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (e) permanently extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal aU itemized deductions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce all individual income tax rates by four percent Under the proposal the marginal income tax rates for individuals IIIOud be 1440 2688 2976 3456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus (1) taxexempt interest (2) employer contributions for heaHh plans and life insurance (3) employer share of FICA tax [4) worke(s compensation (5) nontaxable Social Security benefits (6) insurance value of Medicare benefits (7) alternative minimum tax preference items and 18) exduded income of US citizens living abroad Categories are measured at 2011 levels

(3) Federal taxes are equal to individual income tax (induding the outlay portion of refundable credits) employment tax (attributed to employees) and excise taxes (attributed to consumers) Corporate income tax is not induded due to uncertainty concerning the incidence of the tax Individuals who are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis Does not include indired effects

(4) The average tax rate is equal to Federal taxes described in foomote (3) divided by income described in foolnote (2)

Page 1

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAl THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2015

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

FEDERAL TAXES (3) UNDER

PRESENT LAW

FEDERAL TAXES (3) UNDER

PROPOSAL

Averaae Tax Rate (4) Present

Law Proposal Millions Percent BUlions Percent Billions Percent Percent Percent

Less than $10000 -$1441 -245 $6 02 $4 02 74 57 $10000 to $20000 -$6729 -898 $7 03 $1 (5) 26 03 $20000 to $30000 -$7669 -235 $33 12 $25 09 65 50 $30000 to $40000 -$7163 -107 $67 24 $60 22 105 94 $40000 to $50000 -$5449 -59 $93 34 $87 32 127 121 $50000 to $75000 -$5301 -18 $291 106 $286 103 153 152 $75000 to $100000 -$2488 -08 $307 112 $305 110 178 179

$100000 to $200000 $7131 09 $826 300 $833 302 228 234 $200000 to $500000 $4821 10 $486 176 $491 178 283 293 $500000 to $1000000 $4081 22 $185 67 $189 69 318 338 $1000000 and over $25670 57 $454 165 $480 174 312 370 Total All Taxpayersbullbullbullbullbullbull $5464 02 $2754 1000 $2759 1000 208 214 Source Joint Committee on Taxation

Detail may not add to total due to rounding

(1) The proposallNOUld (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanently extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal all itemized deductions (e) repeal the interest exdusiOn for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce aI individual income tax rates by four percent Under the

proposal the marginal income tax rates for individuals INOUId be 1440268829763456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross Income (AGI) plus [1) tax-exempt interest

(2) employer contributions for health plans and life insurance [3) employer share of FICA tax (4) workers compensation

(5) nontaxable Social Security benefits (6) insurance value of Medicare benefits [7) aHemative minimum tax preference items and

(8) exduded income oIUS citizens living abroad Categories are measured al2011 levels

(3) Federal taxes are equal to individual income tax (indudlng the outlay portion of refundable credits) employment tax (atlributed to employees)

and excise taxes (attributed to consumers) Corporate income tax is not included due to uncertainty concerning the incidence of the tax

Individuals IIo1ho are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis

Does not include indirect effects (4) The average tax rate is equal to Federal taxes described in footnote (3) divided by income desclibed in footnote (2)

Page 2

1)12middot15 October 9 2012

DISTRIBunONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2013

CHANGE IN FEDERAL TAXES (3) FEDERAL TAXES (3) Average Tax Rate (4) INCOME FEDERAL UNDER UNDER Present

CATEGORY (2) TAXES (3) PRESENT LAW PROPOSAL Law Proposal Millions Percent Billions Percent Billions Percent Percent Percent

Less than $10000 $1239 middot190 $7 03 $5 02 85 71 $10000 to $20000 $6511 s14 $11 04 $4 02 40 1600 $20000 to $30000 middot$7249 middot187 $39 16 $31 13 81 66 $30000 to $40000 $6858 middot105 $65 27 $58 24 113 102 $40000 to $50000 $5390 s4 $84 35 $79 33 128 122 $50000 to $75000 $4986 middot20 $254 106 $249 103 151 150 $75000 to $100000 $1343 05 $264 110 $262 109 173 174

$100000 to $200000 $11705 16 $729 305 $741 307 224 231 $200000 to $500000 $9652 23 $421 176 $430 178 278 290 $500000 to $1000000 $4590 29 $159 67 $164 68 317 336 $1000000 and over $25566 71 $362 151 $388 161 314 369 Total All Taxpayers $17836 07 $2394 1000 $2412 1000 205 211 I

Source Joint Committee on Taxation Detal may not add to total due to rounding

(1) The proposallllOud (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (e) permanently extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal aU itemized deductions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce all individual income tax rates by four percent Under the proposal the marginal income tax rates for individuals IIIOud be 1440 2688 2976 3456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus (1) taxexempt interest (2) employer contributions for heaHh plans and life insurance (3) employer share of FICA tax [4) worke(s compensation (5) nontaxable Social Security benefits (6) insurance value of Medicare benefits (7) alternative minimum tax preference items and 18) exduded income of US citizens living abroad Categories are measured at 2011 levels

(3) Federal taxes are equal to individual income tax (induding the outlay portion of refundable credits) employment tax (attributed to employees) and excise taxes (attributed to consumers) Corporate income tax is not induded due to uncertainty concerning the incidence of the tax Individuals who are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis Does not include indired effects

(4) The average tax rate is equal to Federal taxes described in foomote (3) divided by income described in foolnote (2)

Page 1

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAl THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2015

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

FEDERAL TAXES (3) UNDER

PRESENT LAW

FEDERAL TAXES (3) UNDER

PROPOSAL

Averaae Tax Rate (4) Present

Law Proposal Millions Percent BUlions Percent Billions Percent Percent Percent

Less than $10000 -$1441 -245 $6 02 $4 02 74 57 $10000 to $20000 -$6729 -898 $7 03 $1 (5) 26 03 $20000 to $30000 -$7669 -235 $33 12 $25 09 65 50 $30000 to $40000 -$7163 -107 $67 24 $60 22 105 94 $40000 to $50000 -$5449 -59 $93 34 $87 32 127 121 $50000 to $75000 -$5301 -18 $291 106 $286 103 153 152 $75000 to $100000 -$2488 -08 $307 112 $305 110 178 179

$100000 to $200000 $7131 09 $826 300 $833 302 228 234 $200000 to $500000 $4821 10 $486 176 $491 178 283 293 $500000 to $1000000 $4081 22 $185 67 $189 69 318 338 $1000000 and over $25670 57 $454 165 $480 174 312 370 Total All Taxpayersbullbullbullbullbullbull $5464 02 $2754 1000 $2759 1000 208 214 Source Joint Committee on Taxation

Detail may not add to total due to rounding

(1) The proposallNOUld (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanently extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal all itemized deductions (e) repeal the interest exdusiOn for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce aI individual income tax rates by four percent Under the

proposal the marginal income tax rates for individuals INOUId be 1440268829763456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross Income (AGI) plus [1) tax-exempt interest

(2) employer contributions for health plans and life insurance [3) employer share of FICA tax (4) workers compensation

(5) nontaxable Social Security benefits (6) insurance value of Medicare benefits [7) aHemative minimum tax preference items and

(8) exduded income oIUS citizens living abroad Categories are measured al2011 levels

(3) Federal taxes are equal to individual income tax (indudlng the outlay portion of refundable credits) employment tax (atlributed to employees)

and excise taxes (attributed to consumers) Corporate income tax is not included due to uncertainty concerning the incidence of the tax

Individuals IIo1ho are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis

Does not include indirect effects (4) The average tax rate is equal to Federal taxes described in footnote (3) divided by income desclibed in footnote (2)

Page 2

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAl THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2015

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

FEDERAL TAXES (3) UNDER

PRESENT LAW

FEDERAL TAXES (3) UNDER

PROPOSAL

Averaae Tax Rate (4) Present

Law Proposal Millions Percent BUlions Percent Billions Percent Percent Percent

Less than $10000 -$1441 -245 $6 02 $4 02 74 57 $10000 to $20000 -$6729 -898 $7 03 $1 (5) 26 03 $20000 to $30000 -$7669 -235 $33 12 $25 09 65 50 $30000 to $40000 -$7163 -107 $67 24 $60 22 105 94 $40000 to $50000 -$5449 -59 $93 34 $87 32 127 121 $50000 to $75000 -$5301 -18 $291 106 $286 103 153 152 $75000 to $100000 -$2488 -08 $307 112 $305 110 178 179

$100000 to $200000 $7131 09 $826 300 $833 302 228 234 $200000 to $500000 $4821 10 $486 176 $491 178 283 293 $500000 to $1000000 $4081 22 $185 67 $189 69 318 338 $1000000 and over $25670 57 $454 165 $480 174 312 370 Total All Taxpayersbullbullbullbullbullbull $5464 02 $2754 1000 $2759 1000 208 214 Source Joint Committee on Taxation

Detail may not add to total due to rounding

(1) The proposallNOUld (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanently extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal all itemized deductions (e) repeal the interest exdusiOn for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce aI individual income tax rates by four percent Under the

proposal the marginal income tax rates for individuals INOUId be 1440268829763456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross Income (AGI) plus [1) tax-exempt interest

(2) employer contributions for health plans and life insurance [3) employer share of FICA tax (4) workers compensation

(5) nontaxable Social Security benefits (6) insurance value of Medicare benefits [7) aHemative minimum tax preference items and

(8) exduded income oIUS citizens living abroad Categories are measured al2011 levels

(3) Federal taxes are equal to individual income tax (indudlng the outlay portion of refundable credits) employment tax (atlributed to employees)

and excise taxes (attributed to consumers) Corporate income tax is not included due to uncertainty concerning the incidence of the tax

Individuals IIo1ho are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis

Does not include indirect effects (4) The average tax rate is equal to Federal taxes described in footnote (3) divided by income desclibed in footnote (2)

Page 2

D-12-15 October 9 2012

DlSTRIBUllONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

catendar Year 2017

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

FEDERAL TAXES (3) UNDER

PRESENT LAW

FEDERAL TAXES (3) UNDER

PROPOSAL

Average Tax Rate (4) Present

Law Proposal Millions Percent Billions Percent Billions Percent Percent Percent

Less than $10000 bull -$1666 -322 $5 02 $4 01 61 43 $10000 to $20000 -$7170 -1014 $7 02 $0 00 23 00 $20000 to $30000 -$7797 -241 $32 10 $25 08 60 46 $30000 to $40000 -$7478 -98 $76 24 $69 21 105 95 $40000 to $50000 -$5811 -54 $107 34 $102 32 132 125 $50000 to $75000 -$7089 -21 $333 104 $326 102 157 155 $75000 to $100000 -$4820 -13 $358 112 $353 110 184 184

$100000 to $200000 $3436 04 $934 292 $937 293 233 237 $200000 to $500000 $1592 03 $574 180 $576 180 289 297 $500000 to $1000000 $5211 23 $224 70 $229 72 320 341 $1000000 and over $28202 51 $548 171 $576 180 318 374 Total All Taxpa~ -$3390 -01 $3198 1000 $3195 1000 214 219 Source Joint Committee on Taxation Detail may not add to total due to rounding

(1) The proposallMluld (a) repeal he individual AMT (b) he eliminate he phase out of personal exemptions for certain individuals (e) permanently extend he EGTRRA and ARRA provisons related to the EITe and the child tax credit (d) repeal all itemized deductions (e) repeal the interest exclusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (9) reduce all individual income tax rates by four percent Under the proposal he marginal income tax rates for individuals lMlUId be 144() 2688 2976 3456 and 3802

(2) The income concept used to place tax retums into income categories is adjusted gross income (AGI) plus (1) tax-exempt interest (2) employer contributions for health plans and life insurance (3) employer share of FICA tax (4) workers compensation (5) nontaxable Social Security benefils (6) insurance value of Medicare benefils [7J attemative minimum tax preference items and

(8) exduded income of US citizens living abroact Categories are measured at 2011 levels (3) Federal taxes are equal to individual income tax (including the outlay portion of refundable credits) employment tax (attributed to employees)

and excise taxes (attributed to consumers) Corporate income tax is not included due to uncertainty concerning the incidence of the tax Individuals who are dependents of other taxpayers and taxpayers v1th negative income are exduded from he analysis Does not include indirect effects

(4) The average tax rate is equal to Federal taxes described in foolnote (3) divided by income described in foolnote (2)

Page 3

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2019

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

FEDERAL TAXES (3) UNDER

PRESENT LAW

FEDERAL TAXES (3) UNDER

PROPOSAL

Average Tax Rate (4) Present

Law Proposal Millions Percent Billions Percent Billions Percent Percent Percent

Less than $10000 -$1785 -364 $5 01 $3 01 56 37 $10000 to $20000 -$7502 -1075 $7 02 -$1 00 21 -02 $20000 to $30000 -$8165 -237 $34 09 $26 07 59 45 $30000 to $40000 -$8213 -96 $86 24 $78 21 106 97 $40000 to $50000 -$6345 -51 $124 34 $117 32 135 129 $50000 to $75000 -$8975 -24 $382 105 $373 103 161 158 $75000 to $100000 -$7898 -19 $410 113 $402 111 189 187

$100000 to $200000 -$3540 -03 $1042 286 $1039 287 239 242 $200000 to $500000 -$2346 -04 $661 182 $658 182 296 303 $500000 to $1000000 $6074 24 $257 70 $263 72 324 345 $1000000 and over $30574 48 $634 174 $664 183 322 376 Total All Taxpayersbullbullbullbullbullbull -$18222 ~5 $3640 1000 $3622 1000 219 224 Source Joint Committee on Taxation Detay may not add to total due to rounding

(1) The proposal lNOuld (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanenUyextend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal all itemized deductions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce aU individual income tax rates by four percent Under the proposal the marginal income tax rates for individuals lNOuid be 1440268829763456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus [1 [ tax-exempt interest (2) employer contributions for heaUh plans and life insurance (3) employer share of FICA tax (4) INOrkerS compensation (5) nontaxable Social Security benefits (6) insurance value of Medicare benefits (7) alternative minimum tax preference items and (8) exduded income of US citizens HYing abroad CategorieS are measured at 2011 levels

(3) Federal taxes are equal to individual income tax (including the outlay portion of refundable credits) employment tax (attributed to employees)

and excise taxes (attributed to consumers) Corporate income tax is not induded due to uncertainty concerning the incidence of the tax Individuals who are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis

Does not indude indirect effects (4) The average tax rate is equal to Federal taxes described in footnote (3) divided by income described in footnote (2)

Page 4

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2019

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

FEDERAL TAXES (3) UNDER

PRESENT LAW

FEDERAL TAXES (3) UNDER

PROPOSAL

Average Tax Rate (4) Present

Law Proposal Millions Percent Billions Percent Billions Percent Percent Percent

Less than $10000 -$1785 -364 $5 01 $3 01 56 37 $10000 to $20000 -$7502 -1075 $7 02 -$1 00 21 -02 $20000 to $30000 -$8165 -237 $34 09 $26 07 59 45 $30000 to $40000 -$8213 -96 $86 24 $78 21 106 97 $40000 to $50000 -$6345 -51 $124 34 $117 32 135 129 $50000 to $75000 -$8975 -24 $382 105 $373 103 161 158 $75000 to $100000 -$7898 -19 $410 113 $402 111 189 187

$100000 to $200000 -$3540 -03 $1042 286 $1039 287 239 242 $200000 to $500000 -$2346 -04 $661 182 $658 182 296 303 $500000 to $1000000 $6074 24 $257 70 $263 72 324 345 $1000000 and over $30574 48 $634 174 $664 183 322 376 Total All Taxpayersbullbullbullbullbullbull -$18222 ~5 $3640 1000 $3622 1000 219 224 Source Joint Committee on Taxation Detay may not add to total due to rounding

(1) The proposal lNOuld (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanenUyextend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal all itemized deductions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce aU individual income tax rates by four percent Under the proposal the marginal income tax rates for individuals lNOuid be 1440268829763456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus [1 [ tax-exempt interest (2) employer contributions for heaUh plans and life insurance (3) employer share of FICA tax (4) INOrkerS compensation (5) nontaxable Social Security benefits (6) insurance value of Medicare benefits (7) alternative minimum tax preference items and (8) exduded income of US citizens HYing abroad CategorieS are measured at 2011 levels

(3) Federal taxes are equal to individual income tax (including the outlay portion of refundable credits) employment tax (attributed to employees)

and excise taxes (attributed to consumers) Corporate income tax is not induded due to uncertainty concerning the incidence of the tax Individuals who are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis

Does not indude indirect effects (4) The average tax rate is equal to Federal taxes described in footnote (3) divided by income described in footnote (2)

Page 4

0-12-15

October 92012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

calendar Year 2021

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

FEDERAL TAXES (3) UNDER

PRESENT LAW

FEDERAL TAXES (3) UNDER

PROPOSAL

Average Tax Rate (4) Present

Law Proposal Millions Percent Billions Percent Billions Percent Percent Percent

Less than $10000 -$1871 -426 $4 01 $3 01 49 29 $10000 to $20000 -$7658 -1240 $6 02 -$1 00 18 ~4

$20000 to $30000 -$8490 -243 $35 09 $26 07 56 42 $30000 to $40000 -$9070 -96 $95 23 $86 21 107 97 $40000 to $50000 -$7183 -52 $137 34 $130 32 136 129 $50000 to $75000 -$11337 -26 $428 105 $417 103 161 158 $75000 to $100000 -$11465 -25 $462 114 $451 112 189 186

$100000 to $200000 -$14023 -12 $1148 282 $1134 281 243 243 $200000 to $500000 -$7455 -10 $747 184 $739 184 302 306 $500000 to $1000000 $6301 22 $286 70 $292 73 327 347 $1000000 and over $32775 46 $720 177 $753 187 325 377 Total All Taxpayers bull -$39576 -10 $lt4068 ~O-( $lt4029 1000-( 222 225 Source Joint Committee on Taxation Detail may not add to tolal due to rounding

(1) The proposal would (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanently extend

the EGTRRA and ARRA provisons related to the EITC and the child tax aedit (d) repeal all itemized deductions (e) repeal the interest exdusion for new issues of Slate and local bonds (f) tax capital gains as ordinary income and (g) reduce aU individual income tax rates by four percent Under the proposal the marginal income tax rates for individuals would be 1440268829763456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus (1) tax-exempt interest

(2) employer contributions for health plans and life insurance (3) employer share of FICA tax (4) wor1ters compensation (5) nontaxable Social Security benefits (6) insurance value of Medicare benefits (7) aHernative minimum tax preference items and (8) excluded income of US citizens living abroad CategorieS are measured at 2011 levels

(3) Federal taxes are equal to individual income tax (including the ouUay portion of refundable aedils) employment tax (attributed to employees) and excise taxes (attributed to consumers) Corporate income tax is not induded due to uncertainty concerning the incidence of the tax

Individuals lIIIho are dependents of other taxpayers and taxpayers vith negative income are exduded from the analysis

Does not include indirect effeds (4) The average tax rate is equal to Federal taxes described in footnote (3) divided by income described in footnote (2)

PageS

ttD-12~15

October 9 2012

DISTRIBUllONAl EFFECTS OF A PROPOSAl TO REPEAL THE INDIVIDUAl AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAl GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

(Returns in Thousands Dollars in Millions]

Calendar Year 2013

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

All Returns Single Fliers Joint Alers Head of Household Returns Dollars Returns Dollars Returns Dollars Returns Dollars

Less than $10000 2319 -$1239 634 ~$220 299 -$254 1386 -$765 $10000 to $20000 10173 -$6511 5521 -$1077 1104 -$1208 3549 -$4225 $20000 to $30000 12010 -$7249 6508 -$791 1830 -$2513 3671 -$3945 $30000 to $40000 12763 -$6858 7107 -$580 2418 -$3151 3238 -$3127 $40000 to $50000 12706 -$5390 7189 $53 2890 -$3273 2628 -$2170 $50000 to $75000 24163 -$4986 10540 $2796 10101 -$5064 3522 -$2717 $75000 to $100000 16715 -$1344 3968 $3356 11364 -$3484 1384 -$1216

$100000 to $200000 23270 $11704 3143 $6648 19237 $4650 889 $406 $200000 to $500000 5284 $9653 575 $2202 4605 $7299 104 $152 $500000 to $1000000 730 $4590 92 $988 622 $3460 15 $142 $1000000 and over 377 $25566 47 $4508 322 $20618 8 $441 Total All TaXPayersbullbullbullbullbullbull 120512 $17831 3U $17881 54793 $17081 20395 -$17OU I

Source Joint Committee on Taxation Detail may not add to total due to rounding

(1) The proposal would (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanenUy extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal aI itemized deductions (e) repeal the interest exclusion for new issues of State and local bonds (f) tax capital gains 8$ ordinary income and (g) reduce aD individual income tax rates by four percent Under the proposal the marginal income tax rates for individuals would be 144026882976 3456 and 3802

(2) The income concept used to place tax returns inlo income categories is adjusted gross income (AGI) plus (1] tax-exempt interest (2) employer contributions for health plans and life insurance (3] employer share of FICA tax 14] workers compensation (5] nontaxable Social Security benefits 16] insurance value of Medicare benefits (7] alternative minimum tax preference items and 18) excluded income of US citizens living abroad Categories are measured at 2011 levels

(3) Federal taxes are equal to individual income tax (including the outlay portion of refundable credits) employment tax (attributed to employees) and excise taxes (attributed to consumers) Corporate income tax is not included due to uncertainty concerning the incidence of the tax Individuals 0 are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis Does not indude indirect effects

Page 6

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

[Returns In Thousands Dollars in Millions)

calendar Year 2015

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

All Returns Single Fliers Joint Alers Head of Household Returns Dollars Returns Dollars Returns Dollars Returns Dollars

Less than $10000 2434 -$1441 693 -$258 313 -$303 1428 -$880 $10000 to $20000 10490 -$6729 5799 -$1063 1112 -$1265 3579 -$4401 $20000 to $30000 12378 -$7669 6612 -$915 1852 -$2608 3913 -$4145 $30000 to $40000 13760 -$7163 7729 -$584 2546 -$3316 3484 -$3263 $40000 to $50000 13396 -$5449 7603 $183 2990 -$3160 2802 -$2472 $50000 to $75000 bull 25944 -$5302 11266 $3429 10966 -$5045 3712 -$3686 $75000 to $100000 17714 -$2488 4350 $3907 11895 -$4694 1469 -$1701

$100000 to $200000 24083 $7132 3363 $7006 19766 $167 954 -$42 $200000 to $500000 5599 $4821 613 $2105 4882 $2641 105 $75 $500000 to $1000000 784 $4081 100 $946 669 $2992 16 $143 $1000000 and over 423 $25671 54 $4711 360 $20537 9 $422 Total AU Taxpayersbullbullbullbullbullbull 127005 $54M 48183 $19468 57351 $594i 21472 -$19949 Source Joint Committee on Taxation Detail may not add to total due to rounding

(1) The proposal would (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanenUy extend

the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal aU itemized deductions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinaEy income and (g) reduce aI individual income tax rates by four percent Under the proposal the marginal income tax rates for individuals would be 1440 2688 2976 3456 and 3802

(2) The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus (1) tax-exempt interest (2) employer contributions for health plans and life insurance (3) employer share of FICA tax (4) WOJ1(ers compensation 15) nontaxable Social Security benefits16) insurance value of Medicare benefits 111 alternative minimum tax preference items and

18] exduded income of US citizens living abroad Categories are measured at 2011 levels (3) Federal taxes are equal to individual income tax (induding the outlay portion of refundable credits) employment tax (attributed to employees)

and excise taxes (attributed to consumers) Corporale income tax is not induded due to uncertainty concerning the incidence of the tax Individuals ho are dependents of other taxpayers and taxpayers wth negative income are exduded from the analysis Does not indude indirect effects

Page 7

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCllONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

(Returns in Thousands Doars in Millions]

Calendar Year 2017

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

AltRetums Single Rlers Joint Rlers Head of Household Returns Dollars Returns Dollars Returns Dollars Returns Dollars

less than $10000 2756 -$1666 947 -$375 333 -$262 1476 -$1029 $10000 to $20000 10927 -$7170 6105 -$1122 1139 -$1401 3683 -$4647 $20000 to $30000 12987 -$7797 6845 -$880 1917 -$2687 4224 -$4230 $30000 to $40000 14815 -$7478 8378 -$543 2672 -$3386 3764 -$3549 $40000 to $50000 13990 -$5811 7826 $227 3200 -$3042 2964 -$2996 $50000 to $75000 26871 -$7089 11199 $3427 11845 -$5427 3827 -$5090 $75000 to $100000 18325 -$4820 4461 $4315 12338 -$7109 1526 -$2026

$100000 to $200000 24467 $3436 3414 $7226 20091 -$3368 962 -$422 $200000 to $500000 5915 $1592 661 $2759 5144 -$1211 110 $44 $500000 to $1000000 863 $5211 112 $1264 733 $3770 17 $178 $1000000 and over 432 $28202 56 $5451 367 $22280 10 $472 Total All Taxpayersbullbullbullbullbullbull 132346 -$3390 50004 $21749 59779 -$1845 22563 -$23294 Source Joint Committee on Taxation Detail may not add to total due to rounding

(1) The proposal MlUId (a) repeal the Individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (e) permanenlly extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal aU itemized dedUdions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce al individual income tax rates by four percent Under the

proposal the marginal income tax rates for individuals would be 1440268829763456 and 3802 (2) The income concept used to place tax returns into income categories is adjusted 9ross income (AGI) plus (1) tax~pt interest

(2) employer contributions for health plans and life insurance [3) employer share of FICA tax [4) workers compensation [5) nontaxable Social Security benefits (6) insurance value of Medicare benefits f7l alternative minimum tax preference items and

[8) exduded income of US citizens living abroad Categories are measured at 2011 levels (3) Federal taxes are equal to individual income tax (indOOing the ouUay portion of refundable credits) employment tax (attributed to employees)

and excise taxes (attributed to consumers) Corporate income tax is not indOOed due to uncertainty concerning the incidence of the tax Individuals ootIo are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis Does not include indired effects

Page 8

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCllONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

(Returns in Thousands Doars in Millions]

Calendar Year 2017

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

AltRetums Single Rlers Joint Rlers Head of Household Returns Dollars Returns Dollars Returns Dollars Returns Dollars

less than $10000 2756 -$1666 947 -$375 333 -$262 1476 -$1029 $10000 to $20000 10927 -$7170 6105 -$1122 1139 -$1401 3683 -$4647 $20000 to $30000 12987 -$7797 6845 -$880 1917 -$2687 4224 -$4230 $30000 to $40000 14815 -$7478 8378 -$543 2672 -$3386 3764 -$3549 $40000 to $50000 13990 -$5811 7826 $227 3200 -$3042 2964 -$2996 $50000 to $75000 26871 -$7089 11199 $3427 11845 -$5427 3827 -$5090 $75000 to $100000 18325 -$4820 4461 $4315 12338 -$7109 1526 -$2026

$100000 to $200000 24467 $3436 3414 $7226 20091 -$3368 962 -$422 $200000 to $500000 5915 $1592 661 $2759 5144 -$1211 110 $44 $500000 to $1000000 863 $5211 112 $1264 733 $3770 17 $178 $1000000 and over 432 $28202 56 $5451 367 $22280 10 $472 Total All Taxpayersbullbullbullbullbullbull 132346 -$3390 50004 $21749 59779 -$1845 22563 -$23294 Source Joint Committee on Taxation Detail may not add to total due to rounding

(1) The proposal MlUId (a) repeal the Individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (e) permanenlly extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal aU itemized dedUdions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce al individual income tax rates by four percent Under the

proposal the marginal income tax rates for individuals would be 1440268829763456 and 3802 (2) The income concept used to place tax returns into income categories is adjusted 9ross income (AGI) plus (1) tax~pt interest

(2) employer contributions for health plans and life insurance [3) employer share of FICA tax [4) workers compensation [5) nontaxable Social Security benefits (6) insurance value of Medicare benefits f7l alternative minimum tax preference items and

[8) exduded income of US citizens living abroad Categories are measured at 2011 levels (3) Federal taxes are equal to individual income tax (indOOing the ouUay portion of refundable credits) employment tax (attributed to employees)

and excise taxes (attributed to consumers) Corporate income tax is not indOOed due to uncertainty concerning the incidence of the tax Individuals ootIo are dependents of other taxpayers and taxpayers with negative income are exduded from the analysis Does not include indired effects

Page 8

0-12-15 October 9 2012

DISTRIBUTIONAL EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAL AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

[Returns In Thousands Dollars in Millions]

Calendar Year 2019

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES~)

All Returns Single Fliers Joint Alers Head of Household Retums Dollars Retums Dollars Retums Dollars Retums Dollars

less than $10000 2866 -$1785 1097 -$408 340 -$286 1429 -$1092 $10000 to $20000 11088 -$7502 6181 -$1185 1177 -$1541 3731 -$4775 $20000 to $30000 bull 13425 -$8165 6988 -$923 1977 -$2844 4460 -$4400 $30000 to $40000 bull 15675 -$8213 8862 -$515 2811 -$3581 4002 -$4117 $40000 to $50000 14600 -$6345 8193 $369 3323 -$3023 3084 -$3689 $50000 to $75000 28146 -$8975 11563 $3969 12666 -$6372 3917 -$6572 $75000 to $100000 19002 -$7898 4697 $5075 12733 -$10517 1571 -$2456

$100000 to $200000 24629 -$3536 3493 $7158 20146 -$9687 990 -$1007 $200000 to $500000 6148 -$2352 693 $3249 5334 -$5585 121 -$16 $500000 to $1000000 907 $6074 117 $1564 771 $4320 18 $191 $1000000 and over 445 $30574 57 $5929 378 $24134 10 $510 Total All Taxpayers 136131 -$18222 51141 $24282 61657 -$14182 23333 -$27421 Source Joint Committee on Taxation Detail may not add to total due to rounding

(1) The proposal would (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (c) permanently extend the EGTRRA and ARRA provlsOll$ related to the BTC and the child tax credit (d) repeal al Itemized deductions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce aD individual income tax rates by four percent Under the

proposal the marginal income tax rates for individuals would be 1440268829763456 and 3802 (2) The income concept used to ptace tax returns into income categories is adjusted gross income (AGI) plus [1J tax-exempt interest

(2) employer contributions for health plans and ure insurance 3] employer share of FICA tax [4J workers compensation

[5J nontaxable Social Security benefits [6] insurance value of Medicare benefits [71 alternative minimum tax preference items and (8J exdUded income of US citizens living abroad Categories are measured at 2011 levels

(3) Federal taxes are equal to individual income tax (induding the ouUay portion of refundable credits) employment tax (attributed to employees) and excise taxes (attributed to consumers) Corporate income tax is not induded due to uncertainty concerning the incidence of the tax Individuals who are dependents of other taxpayers and taxpayers 1Mth negative income are exduded from the analysis

Does not indude indired effects

Page 9

D-12-15 October 9 2012

DISTRIBUllONAl EFFECTS OF A PROPOSAL TO REPEAL THE INDIVIDUAl AMT ELIMINATE CERTAIN DEDUCTIONS

TAX CAPITAL GAINS AS ORDINARY INCOME AND REDUCE MARGINAL INCOME TAX RATES BY FOUR PERCENT (1)

(Returns in Thousands Dollars in Millions)

catendar Year 2021

INCOME CATEGORY (2)

CHANGE IN FEDERAL TAXES (3)

All Returns Single Filers Joint Filers Head of Household Returns Dollars Returns Dollars Returns Dollars Returns Dollars

Less than $10000 2909 -$1871 1191 -$440 345 -$318 1374 -$1113 $10000 to $20000 11017 -$7658 6073 -$1237 1161 -$1572 3783 -$4848 $20000 to $30000 13630 -$8490 6905 -$909 2045 -$2964 4681 -$4617 $30000 to $40000 16217 -$9069 9147 -$491 2914 -$3783 4157 -$4795 $40000 to $50000 15186 -$7183 8576 $579 3425 -$3190 3184 -$4571 $50000 to $75000 29472 -$11336 12142 $4624 13279 -$7779 4051 -$8182 $75000 to $100000 19924 -$11465 5008 $5704 13257 -$14039 1659 -$3130 $100000 to $200000 24890 -$14023 3602 $6962 20258 -$19204 1030 -$1781 $200000 to $500000 6383 -$7455 715 $3528 5543 -$10905 125 -$78 $500000 to $1000000 935 $6301 120 $1700 796 $4417 19 $184 $1000000 and over 467 $32775 59 $6444 397 $25790 11 $542 Total All Taxpayers 141033 -$39576 53538 $26462 63420 -$33548 24076 -$32391 Source Joint Committee on Taxation Detail may not add to total due to rounding

(1) The proposal would (a) repeal the individual AMT (b) the eliminate the phase out of personal exemptions for certain individuals (e) permanently extend the EGTRRA and ARRA provisons related to the EITC and the child tax credit (d) repeal aD itemized deductions (e) repeal the interest exdusion for new issues of State and local bonds (f) tax capital gains as ordinary income and (g) reduce all individual income tax rates by four percent Under the proposal the marginal income tax rates for individuals would be 144011026881102976110 3456110 and 3802110

(2) The income concept used to place tax returns inlo income categories is adjusted gross income (AGI) plus (1) tax-exempl inlerest (2) employer contributions for health plans and life insurance (3) employer share of FICA lax (4) workers compensation 15) nontaxable Social Security benefits 16] insurance value of Medicare benefits [7] aJtemative minimum tax preference items and (8) exduded income of US citizens living abroad Categories are measured al2011 levels

(3) Federal taxes are equal to individual income tax (induding the outlay portion of refundable credits) employment tax (attributed to employees) and excise taxes (attcibuted to consumers) Corporate income tax is not induded due to uncertainty conceming the incidence of the tax Individuals vtIo are dependents of other taxpayers and taxpayers vfth negative income are exduded from the analysis Does not include indirect effeds

Page 10

11-1155 VERY PRELIMINARY

II-Oct-12

ESTIMATED REVENUE EFFECTS OF A POSSIBLE INDIVIDUAL TAX REFORM PACKAGE

Fiscal Y fan 10II - lOll

[Billions ofDollars]

ProvisioD Effretin lOll 1014 2015 1016 1017 2018 1019 1010 lOll lOll 101l-17 lO1l-ll

I Repeal the individual AMf tyba 1213112 -58 -120 -684 -173 -886 -1020 -1169 -1325 -1508 -1114 -3122 -9858 2 Repeal overall limitation on itemind deductions and

the personal exemption phaseout for cenain taxpayers tyba 1213112 -132 -218 -301 -339 -314 -410 -442 -411 -501 -533 -1430 -3186 3 Extend the EITC [I) tyba 1213112 -01 -62 -61 -61 -6 -61 -61 -62 -64 -65 -246 -559 4 Extend the child tax credit [I ) tyba 1213112 -28 -38 -382 -383 -381 -382 -381 -38 -319 -319 -1554 -3456 5 Repeal itemind deductions tyba 1213112 1344 2058 2150 2301 2444 2582 2111 2848 2982 3121 10296 24546 6 Repeal interest exclusion for new issues of State and

local bonds bia 1213112 04 I8 40 65 96 131 161 205 243 216 223 1244 1 Tax capital gains (and dividends) as ordinary income

and decrease all tax rates by four percen tyba 1213112 -423 -654 -115 -178 -840 -904 -963 -1019 -1016 -1134 -3410 -8505

NETTOTAL bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull 106 -18 41 31 -01 -64 -lll -104 -JOJ -418 156 -374

10int Committee on Taxation

NOTE Details may not add to totals due to rounding The date ofenactment is asswned to be December 3 12012

Legend for Effective colwnn bia = bonds issued a fier tyba =taxable years beginning after

[I] Estimate includes the following outlay effects Extend the EITC Extend the child tax credit

2013 2014 48

231

2015 48

235

2016 48

231

2011 41

225

2018 41

ll4

2019 48

222

2020 48

II

2021 49

219

20ll 5

219

2013-11 190

928

2013-22 431

2031

11-1155 VERY PRELIMINARY

II-Oct-12

ESTIMATED REVENUE EFFECTS OF A POSSIBLE INDIVIDUAL TAX REFORM PACKAGE

Fiscal Y fan 10II - lOll

[Billions ofDollars]

ProvisioD Effretin lOll 1014 2015 1016 1017 2018 1019 1010 lOll lOll 101l-17 lO1l-ll

I Repeal the individual AMf tyba 1213112 -58 -120 -684 -173 -886 -1020 -1169 -1325 -1508 -1114 -3122 -9858 2 Repeal overall limitation on itemind deductions and

the personal exemption phaseout for cenain taxpayers tyba 1213112 -132 -218 -301 -339 -314 -410 -442 -411 -501 -533 -1430 -3186 3 Extend the EITC [I) tyba 1213112 -01 -62 -61 -61 -6 -61 -61 -62 -64 -65 -246 -559 4 Extend the child tax credit [I ) tyba 1213112 -28 -38 -382 -383 -381 -382 -381 -38 -319 -319 -1554 -3456 5 Repeal itemind deductions tyba 1213112 1344 2058 2150 2301 2444 2582 2111 2848 2982 3121 10296 24546 6 Repeal interest exclusion for new issues of State and

local bonds bia 1213112 04 I8 40 65 96 131 161 205 243 216 223 1244 1 Tax capital gains (and dividends) as ordinary income

and decrease all tax rates by four percen tyba 1213112 -423 -654 -115 -178 -840 -904 -963 -1019 -1016 -1134 -3410 -8505

NETTOTAL bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull 106 -18 41 31 -01 -64 -lll -104 -JOJ -418 156 -374

10int Committee on Taxation

NOTE Details may not add to totals due to rounding The date ofenactment is asswned to be December 3 12012

Legend for Effective colwnn bia = bonds issued a fier tyba =taxable years beginning after

[I] Estimate includes the following outlay effects Extend the EITC Extend the child tax credit

2013 2014 48

231

2015 48

235

2016 48

231

2011 41

225

2018 41

ll4

2019 48

222

2020 48

II

2021 49

219

20ll 5

219

2013-11 190

928

2013-22 431

2031