Table 4 shows, for selected tax returns, representing different marital status, different numbers of exemptions, and different levels of adjusted gross income, the tax burden under the standard deduction provision in the bill reported by the Senate Finance Committee and the tax burden under the standard deduction provision in the committee floor amendment. TABLE 1.-SENATE FINANCE COMMITTEE FLOOR AMENDMENTS TO H.R. 10612 1: 1 Additional amendments agreed to by the committee after the bill was ordered reported. These amendments are to be offered on the floor. 2 Less than $5,000,000. TABLE 2.-SENATE FINANCE COMMITTEE FLOOR AMENDMENTS, TO H.R. 106121; ESTIMATED EFFECT ON FISCAL TABLE 2.-SENATE FINANCE COMMITTEE FLOOR AMENDMENTS TO H.R. 106121: ESTIMATED EFFECT ON FISCAL YEAR RECEIPTS-Continued 1 Additional amendments agreed to by the committee after the bill was ordered reported. These amendments are to be offered on the floor. * Less than $5,000,000. There is also an estimated $2,000,000 decrease in budget receipts for fiscal year 1976 under this provision. 4 It is estimated that this provision will decrease budget receipts by $65,000,000 in the aggregate over the next 5 fiscal years. This is the net effect of this provision after deducting from the gross decrease in budget receipts the increase in the Finance Committee minimum tax. TABLE 3.-ESTIMATED FULL-YEAR DECREASE IN INDIVIDUAL INCOME TAX LIABILITY UNDER THE LIBERALIZED MINIMUM STANDARD DEDUCTION PROVISION OF THE COMMITTEE FLOOR AMENDMENT-BY ADJUSTED GROSS INCOME CLASS: 1975 INCOME LEVELS! 1 This table represents the decrease in tax liability under the $2,000-$2,700/16 percent/$2,400-$2,800 standard deduction as compared to the $1,700-$2,100/16 percent/$2,400-$2,800 standard deduction. Note: Details may not add to totals because of rounding. TABLE 4.-INDIVIDUAL INCOME TAX BURDEN IN 1978 UNDER THE STANDARD DEDUCTION AND EARNED INCOME CREDIT PROVISIONS APPROVED IN THE SENATE FINANCE COMMITTEE REPORT 2 AND UNDER THE STANDARD DEDUCTION AND EARNED INCOME CREDIT PROVISIONS IN THE COMMITTEE FLOOR AMENDMENT 3 SINGLE PERSON AND MARRIED COUPLE WITH NO, 1, 2, AND 4 DEPENDENTS [Assuming deductible personal expenses of 17 percent of income] report ment floor Under report amend ment Under amendreport ment floor Under amendreport ment provisions provisions Reduction provisions provisions Reduction provisions provisions Reduction provisions provisions Reduction provisions provisions Reduction Under floor Under floor Under Under report amendment Adjusted gross income $3,000 $78 $35 $43 0 0 $5,000 -$300 -$300 415 358 57 $200 $112 $6,000 $88 -209 -293 $84 605 0 -$300 -300 548 -300 300 57 354 260 94 38 $8,000 -53 90 -74 1,016 -158 $84 -200 -200 953 63 0 696 586 110 561 459 $10,000. 102 434 338 96 1, 482 1,410 200 112 72 1,076 $88 962 114 934 820 $12,500 114 791 677 1,996 114 1,996 518 418 100 1,573 1,446 127 1, 408 $15,000 1,295 113 1,261 2, 549 1,152 109 976 2, 549 867 2, 029 109 1,996 33 1,864 $17,500. 1, 831 33 1,699 3, 145 1,666 33 3, 145 1,371 1, 342 29 2,516 2,516 0 2, 329 $20,000 2, 329 0 2, 156 2,156 3,784 1,826 3, 784 3,035 3, 035 1,826 0 0 2, 848 $25,000 2,848 0 5, 230 5, 230 2, 660 2,660 0 2,285 4, 170 4, 170 2,285 0 3, 960 $30,000 3,960 0 6, 850 3,750 3,750 0 6, 850 5, 468 3, 330 5,468 3, 330 0 $35,000 5, 228 5, 228 0 4,988 4,988 0 8, 625 8, 625 4, 508 6, 938 4, 508 6, 938 0 6, 668 $40,000 6,668 0 6, 398 6, 398 0 10, 515 10, 515 5, 858 8, 543 5,858 8, 543 0 7,958 7,958 7,373 7,373 0 1 Computed without reference to the tax tables. 2 Includes the effect of the $1,700-$2,100/16 percent/$2,400-$2,800 standard deduction and the 10-percent credit on earned income phased out between $4,000 and $3,000 of adjusted gross income. Includes the effect of the $2,000-$2,700/16 percent/$2,400-$2,800 standard deduction and the 10 percent credit on earned income phased out between $4,000 and $8,000 of adjusted gross income. 4 Wage or salary and/or self-employment income. III. EXPLANATION OF ADDITIONAL COMMITTEE AMENDMENT TO H.R. 10612, AS REPORTED A. TITLE XXII-ESTATE AND GIFT TAXES 1. Allowance of Credit Against Estate Tax (sec. 2201(a) of the bill and sec. 2010 of the Code) Present law Under present law, the estate of each decedent who was a resident or a citizen is entitled to an exemption of $60,000 for estate tax purposes. In the case of an estate of a nonresident alien, the exemption is $30,000. Reasons for change The present amount of the estate tax exemption was set in 1942. Since that date, the purchasing power of the dollar has decreased to less than one-third of its value in 1942. To some extent this effect has been mitigated by the addition of a provision for a marital deduction in 1948. Despite this the inflation which has occurred means that the estate tax now has a much broader impact than was originally contemplated. In addition, since the present estate tax exemption is a deduction in determining the taxable estate, it results in a greater reduction at the estate's highest estate tax brackets. However, a credit in lieu of an exemption will have the effect of reducing the estate tax at the estate's lower estate tax brackets since a tax credit is applied as a dollar-fordollar reduction of the amount otherwise due. Thus, at a given level of revenue cost, a tax credit tends to confer more tax savings on smalland medium-sized estates, whereas a deduction tends to confer more tax savings on larger estates. The committee believes it would be more equitable if the exemption were replaced with a credit rather than a deduction. Explanation of provision The committee amendment provides for a credit in lieu of the present exemption for estate tax purposes. The amount of the credit will be $30,000 for decedents dying in 1977 and increases $5,000 each year until 1981 when the credit will be $50,000. When fully effective, the $50,000 credit is approximately equivalent to a tax exemption on the first $197,000 of the decedent's taxable estate. Thus, in 1981 an estate of $197,000 or less will be exempt from estate tax. The committee amendment also makes comparable changes in the treatment of estates of nonresident aliens. Effective date This amendment is effective for estates of decedents dying after December 31, 1976. (13) 72-966- -2 |