New tax plan is step in the right direction

STAYING AHEAD

August 15, 1993|By JANE BRYANT QUINN

New York -- Turns out, the president told the truth. In poll after poll, Americans claimed that his tax plan would flay the middle class. As promised, however, it flays only the rich and the well-to-do. Everyone will pay a gas tax but that's chump change. Most Americans are not being asked to contribute to the federal fiscal fix.

And it is a fix, or at least a start. No single bill can correct the monster imbalances run up in the 1980s, but this one moves the budget in the right direction.

Any change in taxes reflects America's shifting power mix. A president can talk himself hoarse about "shared sacrifice." But politics and the Zeitgeist designate the groups that will actually pay the price. Here's what the tax bill shows of the national mood:

* The middle class is again ascendant, after relinquishing its place in the early 1980s to the nation's love affair with the rich. Those in the middle class will contribute only a gasoline tax to budget reduction, and that hardly qualifies as hardship.

The House/Senate compromise cut the new tax to 4.3 cents a gallon, starting in October. But the price of regular gas at the pump is down 6 cents from two years ago, reports the Petroleum Industry Research Foundation, so you're still 1.7 cents ahead. Assuming no change in price, the average household should spend $13 less next year than it did two years ago, even after the new tax.

* There's rising concern for the working poor, whose social benefits were greatly reduced a decade ago. An enlarged earned-income tax credit will offer many of the poor a bigger reward for taking a job rather than going on welfare.

* The rich, falling from their privileged political perches, will pay most of the new personal income taxes. From the stir they raised, you'd think half the nation was being hurt. In fact, out of a total of 116 million tax filers, only 1.4 million are actually subject to the big rise in income-tax brackets.

Under the new bill, there's a 36 percent tax rate on single people with a taxable income (after deductions) of $115,000, heads of households with $125,500 and married couples with $140,000. Those break points conservatively reflect adjusted gross incomes, before deductions, of around $140,000, $150,000 and $170,000, respectively.

The tax rate rises to 39.6 percent for taxable incomes exceeding $250,000 regardless of whether you're married or single. That reflects a gross income of perhaps $300,000 or more.

The jump in tax rates is retroactive to Jan. 1, with a sweetener tossed in. The payments for 1993's extra tax can be stretched over three years, with the first payment due next April 15.

* The elderly also lost clout -- especially those who are well-to-do. The new rules affect Social Security beneficiaries whose "provisional income" exceeds $44,000 for couples and $34,000 for singles. In this bracket, 85 percent of your Social Security benefit is subject to tax. (Provisional income is your adjusted gross income, your tax-exempt interest from municipal bonds, certain foreign income and half your Social Security benefit.)

That's about 13 percent of all recipients, and their lobbies are in full cry. To me, however, their new tax is fair. A worker earning $50,000 and paying a tax on all his income may have children to feed and educate.

1993, Washington Post Writers Group

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