Money Matters: Inform well your opinion

Author: Harriet Johnson Brackey

Published: September 5, 2004

It's part of my makeup as a voter to try to figure out how far each candidate plans to reach into my pocket. President Bush and Democratic Party presidential nominee John Kerry have not made this easy.

Their tax-policy proposals are not in the limelight, out where the balloons are falling and the crowds cheering. Kerry's camp hasn't laid out a lot of details. Bush's intentions you can take from his past budgets.

Maybe they don't want anyone to calculate how much their tax promises will cost, or maybe it's just too off message to talk numbers, but I don't mind. I took some of my information on their plans from The Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, and some from a recently released study by the Big Four accounting firm of Deloitte & Touche.

I think you, too, might want to know what their personal finance plans are:

? Ordinary income taxes. Bush wants to keep the cut-rates. Kerry wants to keep them for everyone but the wealthy. The current law would allow the cuts to die.

Bush succeeded in reducing ordinary income-tax rates, expanding the lower-rate brackets and reducing the marriage penalty. Congress passed his 2001 and '03 tax plans, but each cut has an expiration date of between now and 2010.

Bush wants to eliminate those expiration dates and make the tax cuts permanent.

Kerry wants to extend some but not all. He seems to want to repeal the lower rates for families with incomes over $200,000. For that group, he would restore the top marginal tax rates of 36 and 39.6 percent, up from the current 33 and 35 percent.

? Dividends and capital gains. Bush succeeded in getting dividends treated the same as capital gains for investors, and the capital gains rate was cut to a maximum of 15 percent, down from 20 percent.

This tax cut has an expiration date of 2008.

Kerry wants the higher-income folks to pay higher taxes on dividends and capital gains, at the same rate as they pay on ordinary income.

? Alternative minimum tax. The Tax Policy Center reports that Bush and Kerry have identical proposals for this hideous tax, which is expected to hit 29 million taxpayers by 2010. That seems hard to believe.

What's even harder to accept as real change is the slight increase they both would put to the exempt amount, from $45,000 for a married couple to $58,000.

? New ways to save. For two years in a row, Bush's budgets have proposed Lifetime Savings Accounts and Retirement Savings Accounts.

''This will still be very much on the agenda if Bush is reelected,'' said Chris Edwards, director of tax-policy studies at the Cato Institute.

These would be somewhat like Roth IRAs, in which after-tax income is put away and can later be withdrawn tax free. They'd be far more flexible, however, allowing withdrawals more quickly and for purposes other than retirement. Wall Street, I suspect, is very much counting on these accounts as its next big thing.

Kerry's thoughts on these accounts aren't clear.

? Estate tax. Bush's tax plan has the estate tax on its way to extinction by 2010. Unless the law changes, it would reappear in 2011.

Kerry proposes to keep the current top estate-tax rate at 48 percent and to set the exemption level at $4 million per couple.

? Credits and other gifts. Kerry proposes a refundable College Opportunity Tax Credit of up to $2,500.

He would also increase the maximum amount of child-care expenses allowable under the child- and dependent-care tax credit and would make that credit partially refundable.

Also, for early retirees, Kerry has a 25 percent refundable tax credit toward the cost of health insurance in his plan.

The impact of all this: The Tax Policy Center says Bush's tax cuts would reduce federal revenues by $1.2 trillion over 10 years while Kerry's would reduce federal revenues by $600 billion.

Bush's tax cuts produced tax savings in every income bracket that Deloitte & Touche examined, up to $1 million in annual income. Kerry's proposals, on the other hand, would produce tax increases for those with $250,000 in annual income or more.

''At the very highest income level of $1 million, the Bush tax cut saved $41,000 for a married couple, while Kerry would take back $35,000 of that,'' said Clint Stretch, Deloitte's director of tax policy.

Let me remind you of two facts:

? Few people live at those upper-income levels. A stretch puts it at 2 percent.

? And Congress writes the tax laws. The president proposes, pushes or cajoles, and lobbyists get in there and push their interests, but, in the end, the president's plans are only plans unless he and Congress agree.

That's why your votes, all of your votes, matter so much.

Here's to an informed choice.