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Information on President's October 6, 1975 Tax Reduction Proposals [Bill]
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Information on President's October 6, 1975 Tax Reduction Proposals [Bill]
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Digitized from Box 16 of the White House Press Releases at the Gerald R. Ford Presidential Library
ANNEX
(*)
Tax Rate Schedule for President's
October 6, 1975 Tax Reduction Proposals
(Married Taxpayers Filing Jointly)
Taxable income
: Present rates :Proposed rates
bracket
:
(percent)
:
(percent)
$
0
$1,000
14
12
1,000
2,000
15
14
2,000
3,000
16
15
3,000
4,000
17
15
4,000
6,000
19
16
6,000
8,000
19
17
8,000
10,000
22
21
10,000
12,000
22
22
12,000
16,000
25
25
16,000
20,000
28
29
20,000
24,000
32
34
24,000
28,000
36
28,000
32,000
39
32,000
36,000
42
36,000
40,000
45
40,000
44,000
48
44,000
52,000
50
52,000
64,000
53
64,000
76,000
55
present
76,000
88,000
58
88,000
100,000
60
100,000
120,000
62
120,000
140,000
64
as
140,000
160,000
66
160,000
180,000
68
180,000
200,000
69
200,000
--
70
Same
Office of the Secretary of the Treasury
October 6, 1975
Office of Tax Analysis
NOTE: While some rates are increased in the higher brackets,
taxpayers with income taxed in those brackets will
benefit from rate reductions in the lower brackets and
the increase in the personal exemption so that on balance
the tax cut proposals will reduce taxes even for those
affected by the increased rates.
(*) ANNEXES PREPARED BY TREASURY DEPARTMENT
OFFICE OF TAX POLICY
AN X B
Tax Rate Schedule for President's
October 6, 1975 Tax Reduction Proposals
(Single Taxpayers)
Taxable income
: Present rates :Proposed rates
bracket
:
(percent)
:
(percent)
$
0
$ 500
14
12
500
1,000
1
15
13
1,000
1,500
16
15
1,500
2,000
17
15
2,000
3,000
19
16
3,000
4,000
19
17
4,000
5,000
21
18
5,000
6,000
21
19
6,000
8,000
24
21
8,000
10,000
25
24
10,000
12,000
27
27
12,000
14,000
29
29
14,000
16,000
31
31
16,000
18,000
34
18,000
20,000
36
20,000
22,000
38
22,000
26,000
40
26,000
32,000
45
32,000
38,000
50
38,000
44,000
55
44,000
50,000
60
50,000
60,000
62
60,000
70,000
64
70,000
80,000
66
80,000
90,000
68
Same as present law
90,000
100,000
69
100,000
--
70
Office of the Secretary of the Treasury
October 6, 1975
Office of Tax Analysis
NOTE: While some rates are increased in the higher brackets,
taxpayers with income taxed in those brackets will
benefit from rate reductions in the lower brackets
and the increase in the personal exemption so that on
balance the tax cut proposals will reduce taxes even
for those affected by the increased rates.
ANNEX
SIX-POINT UTILITIES PACKAGE
Increase the investment tax credit permanently to 12
percent on all electric utility property except generat-
ing facilities fueled by petroleum products. No change
of the percent-of-tax limitation is involved. The
increase in the credit is allowable only if construction
work in progress is included in the utility's rate base
and the benefit of the increase is "normalized" for
ratemaking purposes. "Normalized" in this sense
means reflecting the tax benefit for ratemaking purposes
pro rata over the life of the asset which generates the
benefit instead of recognizing the entire tax benefit
in the year the utility's taxes are actually reduced.
In the absence of normalization, the entire tax benefit
would flow through immediately in the form of reduced
utility rates for consumers, and no real economic benefit
would result for the utility.
Give electric utilities full, immediate investment tax
credit on progress payments for construction of
property that takes two years or more to build, except
generating facilities fueled by petroleum products,
without regard to the five-year phase-in required by
the Tax Reduction Act of 1975. This new provision
applies only if the regulatory agency includes con-
struction work in progress in the utility's rate base
for ratemaking purposes.
-- Extend to January 1, 1981, the period during which
pollution control facilities installed in a pre-1969
plant or facility may qualify for rapid five-year
straight-line amortization in lieu of normal depre-
ciation and the investment credit.
Permit rapid five-year amortization of the costs of
either converting a generating facility fueled by petroleum
products into a facility not fueled by petroleum products or
replacing a petroleum-fueled facility with one not fueled
by petroleum. This amortization is in lieu of normal
-- 2 -
depreciation and the investment credit, and is available
only if (i) its benefits are "normalized" for ratemaking
purposes, and (ii) construction work in progress is included
in the utility's rate base for ratemaking purposes.
-- Permit a utility to elect to begin depreciation, during the
construction period, of accumulated construction progress
expenditures, generally the same expenditures as those which
qualify for the investment credit construction progress
payments under the Tax Reduction Act of 1975. Any deprecia-
tion taken during the construction period will reduce the
depreciation deductions available after the property is completed.
This early depreciation will be available only if the ratemaking
commission includes construction work in progress in
the utility's rate base and "normalizes" the tax benefits
for ratemaking purposes. Construction of generating
facilities which will be fueled by petroleum products will
not qualify for such depreciation.
-- Permit a shareholder of a regulated public electric utility
to postpone tax on dividends paid by the utility on its common
stock by electing to take additional common stock of the
utility in lieu of cash dividends. The receipt of the stock
dividend will not be taxed. The amount of the dividend
will be taxed as ordinary income when the shareholder sells
the dividend stock and the amount of capital gain realized
on the sale will be decreased (or the amount of capital loss
increased) accordingly. Dividend stock is deemed sold before
other stock.
FY 1976 COST = $600 million
Annex D
MAJOR 1975 INDIVIDUAL TAX REDUCTIONS
The Tax Reduction Act of 1975 contains three temporary
general individual tax cut provisions affecting most taxpayers. The
first was the temporary one-shot rebate of a portion of 1974 tax liabili-
ties, which was implemented through special rebate checks or larger
refund checks last spring (cost: $8. 1 billion). Two other temporary
structural changes enacted in 1975 may be summarized as follows:
Standard deduction liberalization
-- minimum standard deduction (low income allowance)
increased from $1, 300 per return ($650 for married
persons filing separately) to $1, 900 for a joint return
or surviving spouse, $1,600 for single persons, and
$950 for married persons filing separately,
-- maximum standard deduction increased from 15 percent
of AGI (with a maximum of $2,000 or $1,000 for a
married person filing separately) to 16 percent of AGI
(with a maximum of $2,600 for a joint return or surviving
spouse, $2, 300 for a single person, and $1, 300 for
married persons filing separately,
-- effective for one year (generally 1975 calendar year)
COST: $2.5 billion
Personal exemption tax credit
-- new $30 per exemption tax credit (except blind and aged
exemptions) in addition to present law personal exemptions
-- effective for one year (generally 1975 calendar year)
1
COST: $5. 3 billion
The approximate $8 billion of tax reductions effected by the
standard deduction liberalization and the personal exemption tax cut
were reflected in withholding tax reduction over a eight-month period.
Thus, the amount of tax cuts necessary to annualize the 1975 Act with-
holding tax reductions over a 12-month period would be approximately
$12 billion.
ANNEX E
Income Distribution of President's Tax Reduction Proposal
at 1975 Levels of Income
(billions of dollars)
Adjusted gross
:
Tax liability
:
Proposed
:
Tax
:
Percentage
:
Percentage
income class
:
based on
:
1976 tax
:
reduction
: distribution of
:
reduction in
(
:
1972-74 law
:
liability
:
:
tax reduction tax liability 1/
$
0 - $5,000
2.0
0.8
1.2
5.8
61.3
5,000 - 10,000
14.1
9.1
5.0
24.2
35.3
10,000 - 15,000
23.1
17.6
5.5
26.6
23.8
15,000 - 20,000
23.7
19.5
4.2
20.3
17.7
20,000 - 30,000
28.0
24.7
3.3
15.9
11.7
30,000 - 50,000
16.9
15.9
1.0
4.8
5.8
50,000 - 100,000
12.1
11.7
0.4
1.8
3.2
100,000 +
9.4
9.3
0.1
0.5
0.8
TOTAL
129.4
108.7
20.7
100.0
15.9
Office of the Secretary of the Treasury
October 6, 1975
Office of Tax Analysis
(
Based on unrounded liability figures.
NOTE: Detail may not add to totals due to rounding.
ANNEX F
Maximum Levels of Tax-free Earned Income for 1976
Under the President's Tax Reduction Proposal
(rounded to nearest $10)
(
:
Maximum tax-free earned income 1/
:
Poverty income levels 2/
Filing status
:
1975
:
1976
:
1975
:
1976
1
Single
no dependents
2,560
2,800
2,790
2,970
Married, joint return
no dependents
3,830
4,500
3,610
3,850
- dependent
4,790
5,500
4,300
4,570
2 dependents
5,760
6,500
5,500
5,850
3 dependents
6,720
7,500
6,490
6,900
4 dependents
7,670
8,500
7,300
7,770
Single, over 65,
no dependents
3,310
3,800
2,580
2,750
Married, joint return,
both over 65
no dependents
5,330
6,500
3,260
3,460
(
Office of the Secretary of the Treasury
October 6, 1975
Office of Tax Analysis
Y For taxpayers not eligible for the earned income credit.
2' Underlying Consumer Price Index: for 1975, 161.2; for 1976, 171.5.