The ABCs of tax cuts

After the federal income tax withholding schedules were adjusted July 1 to account for part of President Bush’s $350 billion tax-relief stimulus package, it took all of a week for Peter Jennings and his ABC News comrade Dean Reynolds to tell viewers just how miserly the tax cuts supposedly would be for the middle class. It was an exercise in agitprop that would have made Soviet apparatchiks proud.

ABC News went to Austin, Texas, where Mr. Bush served as governor for six years. As readers of this page may remember, Austin was the same setting chosen by the New York Times on Jan. 7, the day the president unveiled his package, to “report” on the Moorheads, a married couple with three children who earned $88,000 a year. The Moorheads believed the president’s package was “not impressive,” according to the Times reporter, who clearly had not outlined the real tax savings the Moorheads would have received. As our calculations demonstrated, however, the president’s plan would have reduced the Moorheads’ federal taxes by $2,976, or more than 30 percent.

In Austin last Tuesday, ABC News found the Linnborns, a married couple who apparently lived by themselves. “The Linnborns, who make about $90,000 a year,” Mr. Reynolds reported, “are now getting $15 more take-home pay every week.” That’s comes to $780 a year. Michelle Linnborn said she wanted to use the money to “take my husband to lunch.” Mr. Linnborn would have preferred to use the tax cut to “restore that ‘57 Chevy in his garage. And at about $15 a week,” propagandist Reynolds snidely observed, “he figures the job will be done in about 20 years.”

In fact, the Linnborns would receive a tax cut of at least $1,996 this year, or nearly $40 per week.

They would save $100 in taxes by virtue of the $2,000 increase in the 10 percent bracket.

They would save another $1,522 through the elimination of the marriage penalty. This $1,522 in savings arises from two changes. First, the standard deduction for married couples will be increased to double that of a single person, yielding a savings of $418. Second, the upper limit for the 15 percent tax bracket for married couples will be expanded to double the upper limit for single filers, yielding the Linnborns a savings of $1,104. Until President Bush eliminated the marriage penalty, the Linnborns’ federal income tax liability was more than $1,500 higher than it would have been if they were merely living together.

Finally, the Linnborns will be saving an additional $374 because the president’s 2003 tax-relief plan reduced their top marginal tax rate from 27 percent to 25 percent. Altogether, the Linnborns will be saving at least $1,996 this year. If any of their income comes from dividends, whose top marginal tax rate in their case was reduced from 27 percent to 15 percent, they would be saving even more. Now, that surefire $1,996 may not mean much money to the high-salaried Peter Jennings and the liberal propagandists at ABC, but $2,500 per year no doubt means a lot to the Linnborns.

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