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June 01, 2003

"Who benefits under the President's plan?"

According to the Republican National Committee:

Who benefits under the President’s plan?

Everyone who pays taxes—especially middle-income Americans — as tax rate reductions passed by Congress in 2001 are made effective immediately. Middle-income families will receive additional relief from accelerated reduction of the marriage penalty, a faster increase in the child tax credit, and immediate implementation of the new, lower 10 percent tax bracket.

Unfortunately this claim has the disadvantage of simply not being true. Tax payers who are already in the ten percent tax bracket receive no tax cut at all.
This is above and beyond the twelve million children the bill leaves behind - those whose parents earn between $10,000 and $26,625. Their parents will not be receiving the $400 per child tax credit that those who earn over $26,625 a year will receive. Both flaws in the bill are bubbling to the surface now, after the bill was hammered out by Republican congressional leaders behind closed doors so that Bush could sign it right after the Memorial Day holiday and before leaving for a diplomatic tour of Europe and the Middle East. According to Tom Daschle in a television news interview, "We weren't in the room."

Some more details from the New York Times:

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....

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.

Posted by Mike at June 1, 2003 04:14 AM

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