03-01 "Read My Lips: More New Tax Cuts - The Distributional Impacts of Repealing Dividend Taxation"



G-DAE Working Paper No. 03-01: “Read My Lips: More New Tax Cuts”

Figure 1. Distribution of 2000 Dividend Income, by AGI

Cumulative Percent of Returns by AGI

income, based on the distribution by AGI, is about 0.70.13 This is much more unequal
than the distribution of U.S. income as a whole, which is currently about 0.47.

IV. Benefits to Seniors from Repeal of Dividend Taxation

The President claims that seniors, nearly 10 million strong, would receive a
disproportionate share of the benefits from eliminating dividend taxes - an average
savings of nearly $1,000 each. We now examine these assertions. First, do 9.8 million
seniors currently receive dividend income? The Census Bureau data presented in Table 1
indicate that the number of people aged 65 and over who received dividend income in
1999 was only about seven million - 17% lower than the administration’s figure. A
couple of explanations could be suggested to explain the discrepancy. The administration
could be using more recent data showing that more seniors receive dividend income.
Also, the administration could be using a different definition of “seniors,” such as those
aged 60 or over.

Next, consider the administration’s claim that seniors with dividend income will receive
an average benefit of $936. An important point is the difference between the
average
benefit and the benefits to the typical senior with dividend income. Given an unequal

13 Gini coefficient calculation made by assuming linearity between each data point. This creates a minor
downward bias in the calculation; the actual Gini coefficient based on dividend income would be slightly
higher.



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