soi bulletin - Internal Revenue Service - Department of the Treasury

Individual Income Tax Returns, Preliminary Data, 1993increased: the child care credit, the earned income credit(in total, as well as the nonrefundable portion), the foreigntax credit, and the general business credit.. The foreign taxcredit increased 16.0 percent for 1993, at least paqlybecause high-income taxpayers who could claim most ofthis credit could offset more of their foreign taxes againstthe increased U.S. tax resulting from the higher marginalU.S. tax rates.The portion of the earned income credit (EIQ used tooffset income tax before credits rose' 1 1.5 percent for 1993after dropping slightly (1.2 percent) for 1992 (Figure K).However, the largest segment of the EIC was the refundableportion, which was treated as a refund and paiddirectly to taxpayers who had no tax against which toapply the.credit, or whose EIC exceeded income tax (andother taxes, such as the self-employment tax). Therefundable portion of the EIC amounted to $12.1 billionfor 1993, up 20.5 percent from the $10.0 billion reportedfor 1992. Total EIC, including'the refundable portion,-equaled-$ B-.6-billion-,a 19.1 percent-increase-over 1992- .SummaryAdjusted gross income and total positive income grew atslower rates for 1993 than they had for 1992; their growth--was-less than the rate-of inflation-. -During this-sameperiod, income tax increased, yet the average tax ratedecreased for most returns, even though the overallaverage tax rate increased. Only taxpayers reporting AGIof $100,000 or more experienced an increase in averagetax rates for 1993. The addition of the new marginal taxrates of 36 percent and 39.6 percent, impacting only highincometaxpayers, significantly contributed to the 5.3percent increase in total income tax, which rose from$476.0 billion to $501.2 billion. The total earned incomecredit (including both the refundable portion and theamounts used to offset tax) grew by 19.1 percent over1992.Unemployment compensation reversed the recenttrend, falling 12.4 percent, while net capital gain (lessloss) continued to increase 21.4 percent. Taxable interestdeclined 19.8 percent to the lowest level since 1980.Itemi:ied deductions increased by 1. 1 percent to $480.4billion, and taxable income grew 2.2 percent, reachingalmost $2.5 trillion.Definitions and Changes In LawIn general, the definitions used in this article are the same -as those in Statistics ofIncome--1992, Individual IncomeTax Returns. The following is a partial list of tax law andInternal Revenue Service administrative changes that -hada major bearing on the 1993 preliminary data presented inthis article.E Alternative Minimum Tax. For Tax Year 1993,the basic alternative minimum tax rate was increasedfrom 24 to 26 percent. Alternative minimum taxableincome in excess of the first $175,000 ($87,500 ifmarried filing separately) was taxed at a new rate of28 percent. This increase in tax rates was partiallyoffset by an increase in the alternative minimum taxexemption, which rose from $40,000 to $45,000 formarried persons filing jointly and qualifyingwidow(er)s, from $30,000 to $33,750 for singlepersons and heads of household, and from $20,000to $22,500 for married persons filing separately.Figure KSelected Tax Credits, Tax Years 1992 and 1993[Number of returns is in thousands--money amounts are in millions of dollars].16 ~1992 (preliminary) 1993 (preliminary) PercentageItem Number Number increaseof Amount of Amount in amountreturnsreturns(1) (2) (3) (4) (5)Total tax credits' ............................................ .12,730 7,396 13,180. 7,922 7.1Child care credit................................................... 5.979 2,524 6,060 2,550 1.0Earned incorne credit, total2 ................................. 5,980 2,066 6,135 2,304 11.5Credit for the elderly or disabled.......................... 243 52 220 48 -7.7Foreign tax credit................................................. 1,074 1,824 1,292 2,116 16.0General business credit ....................................... 241 507 245 517 2.0Credit for prior-year minimum tax ........................ 59 261 56 217 -16.9Includes credits not shown separately.2Represents ' portion of earned income credit used to offset income tax before credits. Additional earned income credit amounts were used to offset other taxes ($1.0 billion for1992 compared to $1.2 billion for 1993), and some amounts were either refundable.or paid directly to the taxpayer($.10.0 billion for 1992 compared to $12.1 billion for 1993).