Bush’s tax proposal draws mixed reviews

By David Drucker
Daily Bruin Reporter

In a Rose Garden Ceremony last week, President Bush formally
unveiled a tax cut plan that he promised would lower rates for all
taxpayers.

If Bush convinces Congress to pass his $1.6 trillion tax relief
package, students entering the job market over the next 10 years
could pay less than their counterparts who are currently at
work.

Fulfilling a campaign promise, Bush sent a plan to Capitol Hill
last week that, if enacted as is, will reduce marginal tax rates
for most taxpayers on income earned.

In other words, people will be required to pay a lower
percentage of their annual income in federal income taxes.

That idea appeals to third-year math student Roberta Ross, who
currently works behind the lecture notes counter in Ackerman Union,
but has three different jobs throughout the year.

“Right now, my biggest stress is that I might have to pay
income taxes,” said Ross, whose income amounts to $8,000
annually. “Even if the amount is very small, every little bit
helps.”

According to Bush’s proposal, though, Ross’s federal
tax rate of 15 percent would remain the same. But a new category
would be created for individuals earning $0 to $6,000 per year.
They would see their rate drop from 15 percent to 10 percent.

The proposal bodes a lot better for Eric Kowalewsky, a ’95
alumnus. Currently a corporate lawyer in Los Angeles earning
approximately $90,000 annually, he stands to see his rates drop
from 31 to 25 percent.

“I think people at my income level deserve a tax
cut,” said Kowalewsky, who’s currently paying off
$80,000 in law school tuition. “The fact that the government
considers us to be “˜rich’ is ridiculous.”

The Bush plan does not affect the mandatory payroll taxes
““ for such programs as Social Security ““ that are
automatically deducted from an employee’s paycheck and
include matching contributions by the employer.

And though the proposal achieves Bush’s pledge to provide
“tax relief for all taxpayers,” it offers more tax
lowering opportunities for married couples with children via tax
credits than for single people or childless couples.

Certified public accountant Keith M. Smukler, who runs an
accounting firm with his partner in the San Fernando Valley, said
although Bush’s plan offers tax relief across the board, it
won’t be that noticeable to the majority of his clients.

“Marginal federal tax rate reductions are nice, but they
don’t touch on a large chunk of the tax pie that is paid out
by the middle class,” Smukler said. “Those in the high
tax brackets will notice this cut a lot more.”

Beyond the practical nuts and bolts of what a tax cut will mean
for ordinary Americans, Bush’s agenda has reignited the
philosophical debate over taxes and how best to approach projected
government surpluses in the coming decade.

Susanne Lohmann, director for the UCLA Center for Governance,
said that for better or worse, the process is determined by
political concerns.

“How you design the tax cut depends on your values,”
she said. “The Democrats favor government spending, because
that’s what their constituents want. Republicans tend to
represent the wealthy, which is why they favor tax cuts.”

Lohmann added that both sides of the aisle will join in on the
tax cutting frenzy because of the nature of how Congress works.
“There are incentives to pass these tax cuts, including for
special interests who gave campaign contributions,” she
said.

“Everybody is going to pile on. It’s going to be,
“˜You vote for my tax cut, I’ll vote for your tax
cut’ as members of congress try to satisfy the people who
elected them,” Lohmann added.

Economics Professor Earl Thompson doesn’t think the
country will be worse off because of a tax cut, but he does believe
it would have a greater effect if it was granted all at once,
rather than being phased in gradually over 10 years.

“When given in this manner, you don’t get any large
stimulative effect,” Thompson said. “But a tax cut is
expansionary and it will increase overall economic
demand.”

In terms of whether it would be wiser to pay down the debt, as
some Democrats have said, Thompson said that such arguments are a
moot point.

“The issue has to be looked at as distributional between
the young and the old,” he said.

“If we maintain government debt where it is and pass a tax
cut, than the beneficiaries are the current class of adults, while
the people who pay the cost of the debt are the children,”
Thompson added.

WHAT LOWER TAXES MEANS TO YOU Below are the
five income categories that indicate the percentage of ferderal
income tax currently paid by each American against income earned.
President Bush proposed a simplied tax code that would lower income
tax and realign the taxable income catergories. Income
level Current rate(%) Proposed
rate(%) $297,301+ 39.6 33.0 $136,751-$297,300 36.0 33.0
$65,551-$136,750 31.0 25.0 $27,051-$65,550 28.0 25.0 $6,001-$27,050
15.0 15.0 $0-$6,000 15.0 15.0 SOURCE: Washington Post Original
graphic by MAGGIE WOO/Daily Bruin Web adaptation by REX LORENZO