Tax cuts won't help the middle class much, critics say Critical analysis may not help Bush make his case, labor group says.

January 30, 1992|By Boston Globe

WASHINGTON -- President Bush's budget provides much smaller benefits to middle-income families than the White House has portrayed, with a family of four getting an average tax cut of only $55 this year and $167 next year, Democratic critics and others say.

By comparison, the wealthiest 1 percent of taxpayers would get a tax cut of $19,000 to $25,000 under the plans, primarily because of the proposed reduction in the capital gains tax, said Robert McIntyre, director of the labor-backed Citizens for Tax Justice.

Moreover, a highly publicized decision by Mr. Bush to change the tax-withholding tables is not a tax cut but simply speeds up a taxpayer's access to money that he or she would otherwise receive as a refund. A single worker could get up to $172 faster than usual. But any taxpayer could have changed this timetable in the same way without Bush's executive order, Budget Director Richard Darman acknowledged yesterday.

The critical analysis could spell political trouble for Mr. Bush, who intended his proposals to bridge the gap between him and his Democratic opponents. Instead, it may have done the opposite, providing the Democrats with more evidence that Bush is favoring the wealthy.

"I think he has fired the opening salvo in this year's class war. It is pretty clear what side he is on," said Mr. McIntyre, whose group was instrumental in passing the 1986 tax reform legislation.

Democrats, who propose raising taxes on the wealthy to pay for higher tax cuts for middle-class citizens, wasted no time in ridiculing the president's proposals.

"If you make over $200,000 a year, get in a line for your $19,000 capital gains tax break," said House Budget Committee chairman Leon Panetta of California.

The average family would receive more benefits from Mr. Bush's plan if it takes advantage of tax breaks to buy a first home, but such incentives would be available to only a few hundred thousand families.

The modest nature of the tax cuts is bound to disappoint many.

For example, a key element of Mr. Bush's plan is that it would increase the personal exemptions for each child -- but not each adult -- by $500. Chief of Staff Samuel Skinner said Tuesday on ABC-TV's "Nightline" that "a family of four will have another $2,000 in exemptions" under Mr. Bush's proposal. But that is not true. Skinner either misspoke or was confused.

Because adults do not get the extra exemption, a family of four would get only $1,000 in exemptions, not $2,000.

Here is the bottom line of what Mr. Bush's proposal actually would provide a typical family of four, which is in the 15 percent tax bracket, the analysts said. With an extra $1,000 in personal exemptions, this family would get a $150 tax break on its 1993 taxes.

But this year, the tax break does not take effect until October, meaning that the family's 1992 savings would be only $38.

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