Skip Navigation

This study was prepared by the staffs of the Human Resources and Community Development Division and the Tax Analysis Division of the Congressional Budget Office, under the supervision of Nancy M. Gordon, Assistant Director, Human Resources and Community Development Division and James M. Verdier, Assistant Director, Tax Analysis Division. Questions regarding the analysis Bay be addressed to Patricia Ruggles or Joseph Minarik.
 
 

This memorandum, prepared at the request of Senator Ernest F. Rollings, examines the impact on households in different income categories of the revenue and spending changes directly affecting individuals that were proposed in the Administration's fiscal year 1983 budget. It extends a memorandum of February 1982, prepared at the separate requests of Senator Hollings and Representative Jones, Chairman of the House Committee on the Budget, that estimated the distributional effects of the tax and benefit reductions enacted in 1981.

This analysis, like that in the earlier memorandum, is limited by the complexity of the tax and expenditure programs involved and by the lack of complete data about them. As in that memorandum, the estimates presented here reflect only the proposed changes in federal taxes and benefits that directly affect specific households. Thus, for example, changes in spending in areas such as defense have not been included, since the benefits arising from these expenditures are not directly allocable to specific households. Additional details concerning the methods used to prepare these estimates, and a discussion of several cautionary points regarding their interpretation, may be found in the CBO's earlier analysis.

In addition, this analysis does not include any possible macroeconomic impacts of the proposed tax and benefit changes. If the budget proposals taken together significantly raised the rate of economic growth and reduced unemployment, then they could provide higher incomes that would offset the reductions in benefits.

The fiscal year 1983 budget includes only small proposed changes in direct taxes, so the estimates presented here focus primarily on the proposed changes in benefit payments. The major findings of this analysis are:

• If the Administration's proposed benefit reductions and direct tax increases were enacted, total savings in calendar year 1983 would be about $11.6 billion, and they would rise to about $23.2 billion by 1985. About half of this amount would come from reductions in means-tested programs.
  
  
• Over half of the savings that would result from the proposals--about $6.2 billion in calendar year 1983--would come from benefit reductions and tax increases affecting households with incomes below $10,000.
  
  
• The average loss as a result of the proposals would be about $320 in 1983 for households with incomes below $10,000. This is almost three times the average reduction for households in all other income categories.
  
  
• The average dollar loss generally declines as income rises. Households with incomes over $80,000, however, would lose roughly $100, or about the same amount as those with incomes between $10,000 and $20,000.

The table below summarizes these findings for calendar year 1983.

This document is available in its entirety in PDF.