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Will 'Dubya' be a good president.
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[QUOTE]Originally posted by Jay: [QB] [QUOTE]Relief to Low-income Families? Over the past week President Bush and his Administration have repeatedly emphasized that his plan will provide tax relief to low-income families and help them enter the middle class. The proposal, however, would provide no assistance to working poor families or to many families modestly above the poverty line. (As described below, these families can pay substantial amounts in other taxes, such as payroll and excise taxes, even after the Earned Income Tax Credit is taken into account.) To estimate the number of families with children who would not benefit from the Bush proposal, we tabulated the latest data from the Census Bureau. These data are for 1999. This analysis considers the effects of the plan on families with children under age 18 as if it were in full effect that year. We found: An estimated 12.2 million low- and moderate-income families with children � 31.5 percent of all families with children � would not receive any tax cut from the Bush proposal. Some 80 percent of these families have workers. Approximately 24.1 million children � 33.5 percent of all children � live in the excluded families. Among African-Americans and Hispanics, the figures are especially striking. While one-third of all children would not benefit from the Bush tax plan, more than half of black and Hispanic children would not receive any assistance. An estimated 55 percent of African-American children and 56 percent of Hispanic children live in families that would receive nothing from the tax cut. Even the Bush proposal to double the child tax credit � the feature of his tax plan that one might expect to provide the most assistance to children in low- and moderate-income families � would provide the largest tax reductions to families with incomes in the $110,000 to $250,000 range, and confer a much larger share of its benefits on upper-income families than on low- and middle-income families. Under the plan, the maximum child credit would be raised from $500 per child to $1,000. Also, the proposal raises the income level above which the child credit begins to phase out from $110,000 to $200,000, extending the credit for the first time to those in this income category. For many of these relatively affluent taxpayers, the child credit would rise from zero to $1,000 per child. By contrast, millions of children in low-and moderate-income working families would continue to receive no child credit, or their credit would remain at its current level of $500 per child or rise to less than $1,000 per child. Since the reason 12 million families and their children would not benefit from the Bush plan is that they do not owe federal income taxes, some have argued that it is appropriate they not benefit. "Tax relief should go to those who pay taxes" is the short-hand version of this argument. This line of reasoning is not persuasive for several reasons. 1. Many of these families owe taxes other than federal income taxes, often paying significant amounts. For most families, their biggest federal tax burden by far is the payroll tax, not the income tax. Data from the Congressional Budget Office indicate that in 1999, three-quarters of all U.S. households paid more in federal payroll taxes than in federal income taxes. (This comparison includes both the employee and employer share of the payroll tax; most economists concur that the employer's share of the payroll tax is passed along to workers in the form of lower wages.) While the Earned Income Tax Credit offsets these taxes for most working families with incomes below the poverty line, many families with incomes modestly above the poverty line who would not benefit from the Bush plan are net taxpayers. Consider two types of families earning $25,000 a year in 2001, an income level the Administration has used in some of its examples: A two-parent family of four with income of $25,000 would pay $3,825 in payroll taxes (counting both the employee and employer share) and lesser amounts in gasoline and other excise taxes. The family pays various state taxes as well. The family's Earned Income Tax Credit of $1,500 would offset well under half of its payroll taxes. Even if just payroll taxes and the EITC are considered, the family's net federal tax bill would be $2,325. Nonetheless, this family would receive no tax cut under the Bush plan. The Administration has used the example of a waitress who is a single-mother with two children and earns $25,000 a year. If this waitress pays at least $170 a month in child care costs so she can work and support her family � an amount that represents a rather modest expenditure for child care � she, too, would receive no tax cut under the Bush plan despite having a significant net tax burden. In her case as well, her payroll taxes would exceed her EITC by $2,325.(2) 2. While many workers would see their marginal tax rates reduced, the Bush plan fails to reduce marginal rates at all for the working families that face the highest marginal rates of any families � working families with children that have incomes between about $13,000 and $20,000. For each additional dollar these families earn, they lose up to 21 cents in the EITC, 15.3 cents in payroll taxes, 24 cents to 36 cents in food stamp benefits, and additional amounts if they receive housing assistance or a child care subsidy or pay state income tax. Ways to reduce marginal rates on these families are well known. The Bush plan does not include them. 3. Low-income working families face some of the most severe marriage tax penalties. The Administration's plan, however, departs from a bipartisan consensus formed in Congress over the past two years to reduce marriage tax penalties for low-wage working families, not just for middle- and upper-income families. Analysts generally concur that some of the most serious marriage penalties in the tax code are those that can face low-income working individuals as a result of the way the phase-out of the EITC is designed. Every major tax bill from both parties in the last year and a half � including major tax bills that Congress passed and President Clinton vetoed in 1999 and 2000 � has contained EITC reforms to provide marriage penalty relief for low-income working families. (Clinton vetoed the bills for other reasons; his budget, too, proposed EITC marriage penalty relief.)[/QUOTE] Center on Budget and Policy Priorities George Double U Bush: Working To Make Sure Wealthy Americans Stay That Way. [/QB][/QUOTE]
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