2nd Study Finds Gaps in Tax Cuts
June 1, 2003
By DAVID FIRESTONE
WASHINGTON, May 31 - A new study by groups critical of the
tax law that President Bush signed on Wednesday has found
that 8 million mostly low-income taxpayers will not receive
any benefit from the law.
Republicans have said for weeks that the new tax law was
designed to benefit all those who pay income taxes.
This is the second time since Congress passed the bill that
critics have pointed out how some of its provisions would
not help millions of people in the lowest tax brackets. In
response to earlier disclosures about the complex bill's
fine print, the Senate's chief Republican writer of tax
legislation said on Friday that Congress should revise at
least some of the law's provisions, involving child tax
credits, to broaden their effect.
The new analysis says that the taxpayers who get nothing
from the tax law are primarily low-income single people who
do not have children and lack income from dividends or
capital gains. A large number of low- and moderate-income
single parents with children over 16 will also get no
benefit from the law, because it did not change the tax
rate for such parents who are unmarried.
The study was conducted by two groups who have been
critical of the law, the Urban-Brookings Tax Policy Center,
which is affiliated with the Brookings Institution and the
Urban Institute, and the Center on Budget and Policy
Priorities, a liberal research group.
Last week, the two groups, along with Citizens for Tax
Justice, found that 6.5 million minimum-wage families -
with nearly 12 million children - would not receive the
$400-per-child increase in the child tax credit contained
in the new law. The families were left out of the tax law
in last-minute Congressional negotiations over how much to
cut the tax on stock dividends and capital gains, while
keeping the entire bill under the Senate limit of $350
billion.
In combination with the children who were cut from the
bill's benefits by the Congressional negotiators, the study
says, there are 50 million households - 36 percent of all
households in the nation - who will receive no benefit from
the tax law. The figure includes people who do not earn
enough to owe income tax.
On Friday, Senator Charles E. Grassley, Republican of Iowa,
the chairman of the Senate Finance Committee, said he would
propose legislation next week to provide the increased
child credit to those minimum-wage families, and to make
the increase permanent for all taxpayers instead of its
expiring in 2005. Such a measure, which would cost at least
$61.5 billion over the next 10 years, would require 60
votes to pass in the Senate. Democrats have said they would
support the cuts for the minimum-wage families, but the
prospects for the full child credit extension are unclear.
A spokesman for House Speaker J. Dennis Hastert, Republican
of Illinois, said the House leadership would take a serious
look at the measure.
The Republican National Committee Web site describes the
law in detail and summarizes the point that many members of
Congress have also made this week.
"Who benefits under the president's plan?" the Web site
asks. "Everyone who pays taxes - especially middle-income
Americans - as tax rate reductions passed by Congress in
2001 are made effective immediately."
Ari Fleischer, the White House press secretary, made a
similar point in his news briefing on Thursday, saying that
people in the lowest tax bracket would "benefit the most"
from the bill. "This certainly does deliver tax relief to
the people who pay income taxes," he said, referring
particularly to families with children. And Mr. Grassley
said last week that "all taxpayers will see more money in
their paychecks."
But the new study found five million taxpayers in the
lowest tax bracket who get no benefit from the law, and 2.5
million single parents with children who also pay taxes but
get nothing.
In the first category are taxpayers in the 10 percent
bracket who have no children and no dividend or capital
gains income. This group, which constitutes 89 percent of
all single taxpayers in the lowest bracket, do not benefit
from the expansion of the 10 percent bracket because they
are already in it. They have no children, so they do not
get the child credit, and they do not benefit from the
law's relief for married couples. Members of this group,
who make $9,300 to $13,800 a year, now pay up to $600 in
income taxes.
The second group consists of 2.5 million taxpayers in the
head-of-household filing status - mostly single parents -
who have a child over 16 and who are in the two lowest tax
brackets. The study found that they will not receive a tax
cut, even though they pay as much as $5,200 in income
taxes, because the lowest bracket is not expanded for
head-of-household filers under the new law. The child
credit is not available, either, because of the age of the
children.
There are about a half-million additional taxpayers at all
income levels who will not benefit from the new law because
they fall between the cracks. They include a childless
married couple in the lowest tax bracket who itemize their
deductions and cannot take advantage of the increased
standard deduction for couples. About 12,000 taxpayers
making more than $200,000 will also receive no benefit
because they have no dividend or capital gains income, and
make too much money to take advantage of the increased
exemptions from the alternative minimum tax in the law.
"It's another illustration that the real purpose of this
tax bill was not to give a boost to the economy now," said
Robert Greenstein, executive director of the Center on
Budget and Policy Priorities. "The bill really consists of
new provisions, like dividend tax cuts, that administration
officials and their supporters in Congress have long wanted
for other reasons. If they were really serious about
boosting the economy, they would not have excluded these
people, because they're the ones who spend rather than
save."
Mr. Fleischer, contacted Friday on the president's trip to
Europe, said the study failed to take into account that
many people who did not benefit from this tax bill received
benefits in the president's first tax cut, in 2001.
"If any taxpayers did not get tax relief in this bill, it
is because it was such a priority to get them a head start
on tax cuts in 2001," he said. "They had a two-year head
start, because they were prioritized over upper-income
taxpayers. The upper income taxpayers had to wait for tax
relief for this bill."
Other Republican officials noted that Congress had also
passed an extension of unemployment benefits, and had
included $10 billion in the tax law in new spending on
Medicaid, the health care program for the poor. Rob
Nichols, the chief spokesman for the Treasury Department,
said the number of people who would not benefit from this
bill was small compared with those who would.
"This legislation helps the working families and small
businesses, women, married couples, families with children
and elderly taxpayers," Mr. Nichols said. "It's
broad-based, and 91 million taxpayers will get relief under
this bill, including 69 million taxpayers who benefit from
accelerating the expansion of the 10 percent bracket. We
view that as very positive."
But the study's authors noted that there are 40 times as
many taxpayers who get no benefit from the cuts as there
are millionaires who will get 44 percent of the law's tax
benefits in 2005.
"This group, more than 8 million taxpayers, ranked lower in
the administration's priorities than the 200,000 taxpayers
with incomes of a million dollars or more," said Peter
Orszag, a senior fellow at Brookings who is co-director of
the Tax Policy Center. "That just demonstrates how
regressive this tax law is." Mr. Orszag was an economic
policy adviser to President Bill Clinton.
Democrats said the failure of the bill to cover all
taxpayers was no accident.
"It was a conscious decision to deny relief to taxpayers at
the bottom in favor of the very top," said Senator Tom
Daschle, the Democratic leader. "And what's so regrettable
is that it wasn't a mistake - it's part of a deliberate
plan."
But the Democratic outrage brought a chuckle from John
Feehery, the spokesman for Mr. Hastert.
"It's interesting that we're having this debate,
considering that we tried to make this tax cut as expansive
as possible given the constraints we were under," he said.
"Democrats on the one hand were saying that we cut taxes
too much, but now they're saying we didn't cut taxes
enough. Their inconsistency is quite remarkable."
http://www.nytimes.com/2003/06/01/na...106768a0d213f8
KS-CoyoteAll of which does nothing for the states which will soon be bankrupt following the same tax strategy.
I wonder how much longer the currency will remain stable, and our credit rating will remain high against other more prudent countries . . .
More disinformation from the Admin 
