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					  Distributional Effects of Tax
          Expenditures

                                 Eric Toder
                              Tax Policy Center
                               April 17, 2009*

     *Note: The figures contained in this presentation are preliminary estimates compiled for this conference,
     and are subject to revision prior to release of a final paper in June 2009




Tax Policy Center | www.taxpolicycenter.org
Figure 1: Sum of Selected Individual
  Income Tax Expenditures (2007)
                      2,000
                      1,800
                      1,600
Billions of dollars




                      1,400
                      1,200
                                                                                                Tax Expenditures
                      1,000
                                                                                                Total Individual Income Tax Liability
                       800
                       600
                       400
                       200
                         0
                                  With Expanded AMT                  With No AMT


                       Source: Leonard Burman, Eric Toder, and Christopher Geissler, "How Big are Total Individual Income Tax
                       Expenditures and Who Benefits from Them?” Tax Policy Center. Discussion Paper No. 31. December 2008.

           Tax Policy Center | www.taxpolicycenter.org
    Figure 2A: Distributional Effects of
Eliminating All Tax Expenditures, No Offset
                  (2007)
                                               Bottom     Second     Middle     Fourth      Top
                                               Quintile   Quintile   Quintile   Quintile   Quintile              Top 1%                   All
                                      0.0%
Percent Change in After-Tax Income




                                      -2.0%
                                      -4.0%

                                      -6.0%
                                      -8.0%

                                     -10.0%
                                     -12.0%

                                     -14.0%
                                     -16.0%
                                                                                       Income Group


                                      Source: Leonard Burman, Eric Toder, and Christopher Geissler, “How Big are Total Individual Income Tax
                                      Expenditures and Who Benefits from Them?” Tax Policy Center. Discussion Paper No. 31. December 2008.

                   Tax Policy Center | www.taxpolicycenter.org
    Figure 2B: Distributional Effects of
Eliminating All Tax Expenditures Excluding
    Capital Gains and Dividends (2007)
                                               Bottom     Second     Middle     Fourth      Top
                                               Quintile   Quintile   Quintile   Quintile   Quintile              Top 1%                   All
                                      0.0%
Percent Change in After-Tax Income




                                      -1.0%
                                      -2.0%
                                      -3.0%
                                      -4.0%
                                      -5.0%
                                      -6.0%
                                      -7.0%
                                      -8.0%
                                      -9.0%
                                     -10.0%
                                                                                       Income Group


                                      Source: Leonard Burman, Eric Toder, and Christopher Geissler, “How Big are Total Individual Income Tax
                                      Expenditures and Who Benefits from Them?” Tax Policy Center. Discussion Paper No. 31. December 2008.

                   Tax Policy Center | www.taxpolicycenter.org
                                         Figure 2C: Distributional Effects of
                                        Eliminating All Tax Expenditures with
                                        Constant Percentage MTR Cut (2007)
                                             Bottom      Second     Middle     Fourth      Top
                                             Quintile    Quintile   Quintile   Quintile   Quintile               Top 1%                   All
                                     6.0%
Percent Change in After-Tax Income




                                     4.0%

                                     2.0%

                                     0.0%

                                     -2.0%

                                     -4.0%

                                     -6.0%

                                     -8.0%
                                                                                       Income Group


                                      Source: Leonard Burman, Eric Toder, and Christopher Geissler, “How Big are Total Individual Income Tax
                                      Expenditures and Who Benefits from Them?” Tax Policy Center. Discussion Paper No. 31. December 2008.

                   Tax Policy Center | www.taxpolicycenter.org
                                        Figure 3A: Distributional Effects of
                                     Eliminating Tax Expenditures for Owner-
                                           Occupied Housing, No Offset
                                              Bottom      Second     Middle      Fourth       Top
                                              Quintile    Quintile   Quintile    Quintile    Quintile   Top 1%   All
                                     0.0%
Percent Change in After-Tax Income




                                     -0.2%
                                     -0.4%
                                     -0.6%
                                     -0.8%
                                     -1.0%
                                     -1.2%
                                     -1.4%
                                     -1.6%
                                     -1.8%
                                                                                        Income Group


                                      Source: Tax Policy Center simulations (preliminary).

                   Tax Policy Center | www.taxpolicycenter.org
                                        Figure 3B: Distributional Effects of
                                     Eliminating Tax Expenditures for Owner-
                                        Occupied Housing, Various Offsets
Percent Change in After-Tax Income




                                      6.0%
                                      5.0%
                                      4.0%
                                      3.0%                                                        Cut MTR by 9.6%
                                      2.0%                                                        Cut MTR by 1.84% points
                                      1.0%                                                        $406 per-capita refundable credit
                                      0.0%
                                      -1.0%
                                      -2.0%
                                                       il e




                                                                                        1%
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                                     Source: Tax Policy Center simulations (preliminary).

                   Tax Policy Center | www.taxpolicycenter.org
                                         Figure 4A: Distributional Effects of
                                      Eliminating Tax Expenditures for Health
                                                  Care, No Offset
                                              Bottom      Second     Middle      Fourth       Top
                                              Quintile    Quintile   Quintile    Quintile    Quintile   Top 1%   All
                                     0.0%
Percent Change in After-Tax Income




                                     -0.5%

                                     -1.0%

                                     -1.5%

                                     -2.0%

                                     -2.5%

                                     -3.0%
                                                                                        Income Group


                                      Source: Tax Policy Center simulations (preliminary).

                   Tax Policy Center | www.taxpolicycenter.org
                                        Figure 4B: Distributional Effects of
                                     Eliminating Tax Expenditures for Health
                                               Care, Various Offsets
Percent Change in After-Tax Income




                                       8.0%
                                       7.0%
                                       6.0%
                                       5.0%
                                       4.0%                                                       Cut MTR by 11.65%
                                       3.0%                                                       Cut MTR by 2.69% points
                                       2.0%                                                       $629 per-capita refundable credit
                                       1.0%
                                       0.0%
                                      -1.0%
                                      -2.0%
                                                       il e




                                                                                        1%
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                                     Source: Tax Policy Center simulations (preliminary).

                   Tax Policy Center | www.taxpolicycenter.org
Figure 5: Distributional Effects of Eliminating
   Tax Expenditures for Retirement Saving

                                              Bottom      Second     Middle      Fourth       Top
                                              Quintile    Quintile   Quintile    Quintile    Quintile   Top 1%   All
                                     0.0%
Percent Change in After-Tax Income




                                     -0.5%

                                     -1.0%

                                     -1.5%

                                     -2.0%

                                     -2.5%

                                     -3.0%
                                                                                        Income Group


                                      Source: Tax Policy Center simulations (preliminary).

                   Tax Policy Center | www.taxpolicycenter.org
Figure 6: Revenue Breakdown of Eliminating
        Tax Expenditures for Saving

                      200
                                                                              All Provisions

                      150
                                                                              Exclude Pension Income from AGI
Billions of Dollars




                      100                                                     No Keogh, SEP and SIMPLe
                                                                              contributions
                                                                              IRA Contributions Taxable
                       50

                                                                              Employee retirement contributions
                        0                                                     taxable
                                                                              Tax DB Plan Accruals
                       -50
                                                                              Tax Accruals in DC Retirement
                                                                              Accounts
                      -100


                       Source: Tax Policy Center simulations (preliminary).

           Tax Policy Center | www.taxpolicycenter.org

				
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