Economic Report of the President

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FairnessA traditional standard for fairness is that taxes should be levied accordingto individuals’ ability to pay. Thus, proponents of income taxation argue thatit is fair because income best reflects the ability to pay taxes. In addition, acommon view is that individuals with higher incomes should pay a greaterproportion of their income in taxes—the tax system should be progressive. Asshown in Box 3-3, the current income tax system is highly progressive.Box 3-3: What Is the Current Distribution of the Tax Burden?A major criterion for judging a tax system is whether it is fair. Oneway to examine this question is to look at the shares of the tax burdenborne by taxpayers in various parts of the income distribution. Nearlytwo-thirds of the total Federal tax burden is borne by the top 20 percentof taxpayers. This includes individual and corporate income taxes,payroll taxes, and excise taxes, but not the effects of temporaryeconomic stimulus provisions that expired at the end of 2004. Asshown in Chart 3-1, the share of taxes of the top 20 percent increasedas a result of the tax cuts enacted since 2001.Another way to look at fairness is in terms of taxes as a percent ofincome. As shown in Chart 3-2, Federal taxes take a larger share ofincome for higher-income groups, both before and after the tax cuts.78 | Economic Report of the President
Box 3-3 — continuedThe bottom 40 percent of the population received the largestpercentage reductions in total Federal taxes (Chart 3-3). After the taxcuts, the bottom 40 percent of the population paid no income taxes,and, on balance, received money back from the income tax system.In summary, the tax relief passed during the President’s first termincreased the overall progressivity of the Federal tax system.Chapter 3 | 79
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Economic Reportof the PresidentTran
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C O N T E N T SECONOMIC REPORT OF T
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ECONOMIC REPORT OF THE PRESIDENTTo
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the playing field is level for our
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LETTER OF TRANSMITTALCOUNCIL OF ECO
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Monetary Policy ...................
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Encouraging FDI ...................
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3-4. The Equivalence of Sales Taxes
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Real GDP expanded by 3.7 percent du
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Options for Tax ReformChapter 3, Op
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and better Nation for it. A compreh
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Innovation and the Information Econ
Page 25 and 26: ecause they do not expect family me
Page 27 and 28: The Administration has pushed aggre
Page 29 and 30: C H A P T E R 1The Year in Review a
Page 31 and 32: Consumer SpendingConsumer spending
Page 33 and 34: easons for this correlation are dis
Page 35 and 36: 2003, a number of countries that to
Page 37 and 38: ProductivityRecent productivity gro
Page 39 and 40: The projected path of inflation as
Page 41 and 42: strengthen. The forecast is based o
Page 43 and 44: The growth rate of the economy over
Page 45 and 46: In sum, potential real GDP is proje
Page 47 and 48: C H A P T E R 2Expansions Past and
Page 49 and 50: The behavior of real GDP is similar
Page 51 and 52: of faltering may be attributable to
Page 53 and 54: most recent expansions have shown r
Page 55 and 56: middle of 2003. The more moderate r
Page 57 and 58: 1.2 percent. Employment continued t
Page 59 and 60: SummaryModerate recessions are foll
Page 61 and 62: permanent cuts should permanently r
Page 63 and 64: and the Jobs and Growth Tax Relief
Page 65 and 66: Federal government revenues had bee
Page 67 and 68: Fiscal policy played an especially
Page 69 and 70: C H A P T E R 3Options for Tax Refo
Page 71 and 72: High Compliance CostsThe complexity
Page 73 and 74: a reasonable estimate is that a 10
Page 75: Excess BurdenBecause taxes distort
Page 79 and 80: more uniform or pure version of the
Page 81 and 82: of being collected all at once at t
Page 83 and 84: would have to differ from state tax
Page 85 and 86: owner claimed it was for business,
Page 87 and 88: The current set of saving incentive
Page 89 and 90: the current system. In addition, so
Page 91 and 92: C H A P T E R 4ImmigrationIn recent
Page 93 and 94: TABLE 4-1.— Foreign-Born Share of
Page 95 and 96: immigrants (also called illegal or
Page 97 and 98: largest group of immigrants was bor
Page 99 and 100: employment costs, including wage fl
Page 101 and 102: Chapter 4 | 103
Page 103 and 104: wages fall in response to immigrati
Page 105 and 106: immigrants from Latin America do re
Page 107 and 108: addition, as migrants leave the cou
Page 109 and 110: include siblings and adult children
Page 111 and 112: despite the tremendous growth in th
Page 113 and 114: The TWP would allow new foreign wor
Page 115 and 116: C H A P T E R 5Expanding Individual
Page 117 and 118: This phenomenon, known as the “tr
Page 119 and 120: producing more of that good. Simila
Page 121 and 122: In 2002, the President proposed “
Page 123 and 124: provide evidence of increased profi
Page 125 and 126: schools are four times as efficient
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low administrative costs, estimated
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Box 5-2: The Benefits of Land Title
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development plan designed by others
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C H A P T E R 6Innovation and theIn
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E-mail is the most common online ac
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Changed circumstances, such as new
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Illegal Acts on the InternetThe Int
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or develop new markets, which can l
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inflation factor for the price cap
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U.S. households connecting to local
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garbling their transmissions. To li
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from 51.3 percent in December 1999
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for their property rights. The Admi
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C H A P T E R 7The Global HIV/AIDS
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Chart 7-1 Estimated HIV Infection L
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There is no cure for HIV/AIDS, thou
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AIDS is more damaging to a househol
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and risk reduction have helped redu
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only one price, the drug companies
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Box 7-1 — continuedfocused on the
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Box 7-2 — continuedenhancing coor
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ConclusionThe United States and cou
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Good Two. In Ricardo’s simple mod
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The Impact of Trade on Labor Market
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The U.S. Advantage in Services Trad
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U.S. firms is associated with a cor
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anked the second-best country out o
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the Chinese government agreed to el
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Trade LiberalizationTariffs and oth
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ConclusionThe United States is the
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LETTER OF TRANSMITTALCOUNCIL OF ECO
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Report to the President on theActiv
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The Council continued its efforts t
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The Staff of the Council of Economi
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John List and Ted Gayer provided co
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Appendix BSTATISTICAL TABLES RELATI
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PageB-32. Gross saving and investme
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PageB-94. Relation of profits after
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE B-2.—Real gross domestic pr
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TABLE B-3.—Quantity and price ind
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TABLE B-5.—Contributions to perce
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TABLE B-6.—Chain-type quantity in
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TABLE B-7.—Chain-type price index
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TABLE B-8.—Gross domestic product
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TABLE B-10.—Gross value added by
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TABLE B-12.—Gross domestic produc
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TABLE B-13.—Real gross domestic p
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TABLE B-14.—Gross value added of
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TABLE B-16.—Personal consumption
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TABLE B-18.—Private fixed investm
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TABLE B-20.—Government consumptio
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TABLE B-22.—Private inventories a
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TABLE B-24.—Foreign transactions
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TABLE B-26.—Relation of gross dom
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TABLE B-28.—National income by ty
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TABLE B-29.—Sources of personal i
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TABLE B-30.—Disposition of person
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Year or quarterTABLE B-32.—Gross
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TABLE B-33.—Median money income (
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TABLE B-35.—Civilian population a
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TABLE B-36.—Civilian employment a
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TABLE B-38.—Unemployment by demog
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TABLE B-40.—Civilian labor force
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TABLE B-42.—Civilian unemployment
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TABLE B-44.—Unemployment by durat
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TABLE B-46.—Employees on nonagric
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TABLE B-47.—Hours and earnings in
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Year orquarterTABLE B-49.—Product
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PRODUCTION AND BUSINESS ACTIVITYTAB
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Year ormonthTABLE B-53.—Industria
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Year or monthTABLE B-55.—New cons
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TABLE B-57.—Manufacturing and tra
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TABLE B-59.—Manufacturers’ new
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Year ormonthTABLE B-61.—Consumer
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TABLE B-62.—Consumer price indexe
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TABLE B-64.—Changes in consumer p
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TABLE B-65.—Producer price indexe
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TABLE B-67.—Producer price indexe
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TABLE B-68.—Changes in producer p
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TABLE B-70.—Components of money s
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TABLE B-71.—Aggregate reserves of
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TABLE B-73.—Bond yields and inter
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TABLE B-74.—Credit market borrowi
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TABLE B-75.—Mortgage debt outstan
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TABLE B-77.—Consumer credit outst
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TABLE B-79.—Federal receipts, out
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TABLE B-81.—Federal receipts, out
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TABLE B-83.—Federal and State and
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TABLE B-85.—State and local gover
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End of yearor monthTABLE B-87.—U.
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End of monthTABLE B-89.—Estimated
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TABLE B-91.—Corporate profits by
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TABLE B-93.—Sales, profits, and s
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YearComposite(Dec. 31,2002=5,000) 3
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YearAGRICULTURETABLE B-97.—Farm i
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TABLE B-99.—Farm output and produ
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Year ormonthTABLE B-101.—Agricult
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INTERNATIONAL STATISTICSTABLE B-103
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TABLE B-104.—U.S. international t
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TABLE B-106.—U.S. international t
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TABLE B-108.—Industrial productio
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TABLE B-110.—Foreign exchange rat
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TABLE B-112.—Growth rates in real
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