Tax cut to fatten most U.S. wallets / Married couples = with kids could benefit most

From: Subject: Tax cut to fatten most U.S. wallets / Married couples with kids could benefit most Date: Sun, 25 May 2003 18:41:27 -0700 MIME-Version: 1.0 Content-Type: multipart/related; boundary="----=_NextPart_000_0000_01C322ED.3FF54CE0"; type="text/html" X-MimeOLE: Produced By Microsoft MimeOLE V6.00.2800.1106 This is a multi-part message in MIME format. ------=_NextPart_000_0000_01C322ED.3FF54CE0 Content-Type: text/html; charset="Windows-1252" Content-Transfer-Encoding: quoted-printable Content-Location: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2003/05/24/MN236098.DTL&type=printable Tax cut to fatten most U.S. wallets / Married couples = with kids could benefit most

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Tax cut to fatten most U.S. wallets =
Married=20 couples with kids could benefit most
David R. Baker, = Chronicle Staff=20 Writer
Saturday, May = 24, 2003=20
=A92003 San=20 Francisco Chronicle | Feedback

URL:
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The tax-cut plan awaiting President Bush's signature this weekend = should=20 save you money -- even if you don't own a single dividend-bearing = stock.=20
It may not be much. It also may not last, since some of the tax = cuts end=20 after a few years. And it may not be enough to kick-start the economy, = the way=20 congressional Republicans hope.=20
But at least in the short term, most Americans will see a drop in = their=20 taxes. The amount each taxpayer will save will rise with the person's = income.=20
"The higher your income, generally speaking, the better deal you're = going=20 to get," said Jackie Perlman, senior tax research analyst with H&R = Block.=20
The tax-cut package passed both houses of Congress Friday in votes = that=20 largely followed party lines. Vice President Dick Cheney broke a 50-50 = tie in=20 the Senate, casting the deciding vote and sending the bill to Bush. = The=20 president is expected to sign it as early as this weekend.=20
The cuts will take many forms, some of them visible almost = immediately,=20 others apparent only at the end of the year.=20
Families who listed a dependent child on their last tax returns = will get=20 $400 checks in the mail in July and August, an advance payment of an = increase=20 in the child tax credit. Workers will see their take-home pay increase = in=20 coming months as companies adjust withholding. Stockholders selling = assets=20 will keep more of the proceeds as the tax rate on such sales falls.=20
Although the proposed cut in dividend taxes has drawn the most = attention,=20 the bill also includes savings for people whose only income is the = weekly=20 paycheck. As an illustration, H&R Block added up the cuts = affecting three=20 basic types of taxpayers, assuming no dividend income or cash from = stock=20 sales:=20

MARRIED WITH KIDS

Among the three groups, the biggest savings go to married couples, = filing=20 together, with children.=20
"They get a lot of goodies here," Perlman said.=20
Under the new bill, a family with two parents and two dependent = children=20 can take advantage of several breaks. A family making $75,000, for = example,=20 will save $800 through an increase in the tax credit the government = grants for=20 each child.=20
That family also will save $419 this year through an increase in = the=20 standard deduction for married taxpayers. That's the result of = government=20 efforts to ease the "marriage penalty" faced when people switch from = filing on=20 their own to filing as a couple.=20
Finally, this family will fall into a lower tax bracket, after = deductions,=20 than it would have before. The new bill lowers the overall tax rate on = several=20 upper tax brackets and places more people in the lower brackets, = saving this=20 hypothetical family $802.=20
The family's total tax cut: $2,021.=20

SINGLE PARENT

Single parents raising one child can take advantage of some, but = not all,=20 of the same cuts.=20
A single parent making $75,000, for example, will benefit both from = the=20 increased child tax credit and a rate decrease for his or her income = level. By=20 shrinking that rate from 27 to 25 percent, the new bill will save this = parent=20 $477, according to H&R Block.=20
Total savings, including $400 saved on the child credit: $877.=20

ON YOUR OWN

Even without children or spouses, most taxpayers will see some = savings.=20
A single person making $75,000 a year will save $776 through a rate = decrease. That taxpayer also will get an extra $50 through an = expansion of the=20 amount of personal income subject to the 10 percent tax bracket.=20
Total savings: $826.=20
By expanding the 10 percent bracket, even singles making more = modest wages=20 will see a savings, although it may not amount to much. A single = taxpayer=20 making $30,000, for example, will save just $50, according to H&R = Block.=20

WILL IT LAST?

The bill's impact in coming years, however, is harder to gauge. = Many of the=20 individual changes -- on tax rates, on child tax credits -- come with = built-in=20 expiration dates.=20
By phasing them out after several years, Congress was able to lower = the=20 cost of the total tax-cut package. Critics charge that merely = disguised the=20 bill's true impact on the nation's deficit, since Congress is likely = to face=20 strong pressure to renew those tax cuts before they expire.=20
The temporary nature of the cuts also will affect what individual = taxpayers=20 do with the money, said Justin Wolfers at Stanford University's = graduate=20 school of business. The tax cut package, he said, may not have much = effect on=20 consumer spending and the sluggish economy if taxpayers think the = savings are=20 temporary.=20
"If you believe it's $400 a year, for the rest of your life, you = might=20 spend $400 today," said Wolfers, an assistant professor of economics. = "If you=20 think it's $400 for the next three years -- you think, 'Maybe I'll = spend $50.'=20 "=20
E-mail David R. Baker at dbaker@sfchronicle.com. =
=A92003 San = Francisco=20 Chronicle | Feedback
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