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Bush plan
January 8, 2003
WASHINGTON -- Whatever their merits, President Bush's proposals to strengthen the economy add up to a grand plan, in at least one sense. If passed, they'll be worth about a grand in many people's pockets.
Bush's proposals essentially turn an evolving series of tax cuts into a quick payoff, a bit like an instant-win, scratch-off ticket. But making taxes lower faster comes at a price that people could end up paying in a multitude of ways -- a school that doesn't get built, a road that doesn't get fixed, a state income tax that rises to make up the difference.
For now, the bottom line would be tax cuts for most people who pay taxes. And for many, the value of those savings would be in the neighborhood of $1,000. Specifically:
-- The typical family of four, with two working parents, would get $1,100 in tax relief in a year, the administration says. That family is defined as having combined income of $39,000.
-- Almost the same savings -- $1,122 -- would go to a married couple with two children earning $75,000, the administration says.
-- The child tax credit would reach $1,000 this year, double what it was worth a few years ago and up $400 from last year.
That's more than enough money to pay the food bills for a toddler in a lower-income family. It's just enough to cover the typical clothing bills for a well-to-do teenager.
In a new feature, even families too poor to pay taxes could get a per-child check for up to $400.
-- Eliminating the federal tax on stock dividends would chiefly benefit the wealthy and the elderly -- those with money to invest in the market. The administration says the average savings for an elderly person who gets dividend income would be $936.
That average, however, masks huge differences.
Citizens for Tax Justice, a liberal group whose statistical analyses are respected by mainstream economists, said someone making up to $44,000 would save no more than $27. Someone making $147,001 to $356,000 would save over $1,300.
The proposal, the most expensive in Bush's plan, does not do anything for many people's prime retirement accounts. Dividends are protected from taxes in 401(k) accounts and similar retirement holdings.
All this and more would come at a cost to people that is impossible to quantify but might be no less real than the benefits.
The estimated cost of Bush's plan is $674-billion over a decade -- equivalent to $2,400 from every adult and child in the country. Combined with the tax cut plan passed two years ago, the cost reaches $7,100 per person over 10 years.
Although the government won't take that money directly from people, it's money Washington or the states won't have to spend if the economy does not grow enough to make up the lost tax receipts.