Dissecting Bush's Tax-Cut Plan

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Families with children stand to benefit most from President Bush's tax cuts

"I've heard all the talk about class warfare and this only benefiting the rich. I think when people take a good hard look at the rate reduction and who benefits and the fact that our plan... eases inequities in the tax code and that the bottom end of the economic ladder receives the biggest percentage cuts, people will come to realize it — I think it's important to cut all tax rates." — President George W. Bush, to reporters Monday.

Extemporaneous sentence construction isn't the President's forte, but he does have a point. Bush's $1.6 trillion tax-cut plan — the core of which is a simplification of the current five-bracket income-tax system of 15 percent, 28 percent, 31 percent, 36 percent and 39.6 to four, lower ones of 10 percent, 15 percent, 25 percent and 33 percent — is not primarily a sweetheart deal for the rich.

It's primarily a sweetheart deal for just the people whom, Senate Democratic Leader Tom Daschle said Saturday, Bush's plan "shortchanges" — working families.

Families first

Married people with kids are by far the biggest beneficiaries of Bush's plan, saving between 15 and 22 percent of their current tax bill when the plan is fully phased in, including reductions in the so-called "marriage penalty" and an expansion of the per-child tax credit from $500 to $1,000. Childless singles, meanwhile, would save between 9 and 15 percent.

Yes, rich folk, who pay the most taxes, reap the most rewards. Families that earn more than $200,000 a year, who make up 2 percent of Americans, would save between 14 to 16 percent of their current tax bite. But their share of the national tax pie, currently at 27.4 percent, remains the same. (Bush's proposal to eliminate the estate tax is where they make most of their money. Which is why Republicans call it the "death tax" and explain it in philosophical terms.)

Under Bush's plan, everybody gets a tax break except those who don't currently pay income taxes. Lower-income singles don't get much help (but don't pay much now) and single and childless folk in general get less, but they all get something. The 39.6 percent and 36 percent taxable-income brackets would become a single 33 percent bracket. The 31 and 28 percent brackets become a single 25 percent bracket. And some of that 15 percent bracket gets reset to 10 percent.

Fiscally undisciplined?

So what's not to like? Well, some folks — the single and childless, especially — may feel that their small refund isn't worth what they see as a risk to fiscal discipline, Social Security and education. Bush will have to convince them that the nation can afford a cut this size.

The plan also puts the lie to some of Bush's own campaign rhetoric about Gore's targeted cuts being social engineering. After scoffing at Democratic notions that only the "right kind of people" should be given tax cuts, Bush has given a tax cut to everybody — but those "right kind of people" are still getting a lot more than everybody else. (The plan also has special breaks for college education and charitable donations.)

But while inequities like that go against the strictest Republican philosophy, they'll go a long way to blunting Democratic complaints that "working families" aren't getting the help they need. Politically, that makes the philosophical inconsistencies well worthwhile — and it's catnip to social conservatives who feel social engineering is okeydoke as long as it involves encouraging traditional nuclear families.

And what would you, a computer-owning middle-class type, get under the Bush plan? We regret to inform you that Bush's proposed streamlining of the tax code does not go far enough to make it immediately understandable to the layperson. Short answer: You'll get a little, maybe 5 or 10 percent off your current tax bite, no matter who you are. Add $1,000 for every kid and as much as $2,500 for every spouse.

Long answer: Call an accountant.