<< February 2001  >>

Young single college grads will benefit a little under the Bush tax cut plan

A story published today by Medill News Service at Northwestern University reports that an examination of the effect of the Bush tax cut on young single recent graduates showed that they will save, but according to a tax expert, their savings would be minimal.

"The single people, when compared to married folks with children, receive less of a benefit because they only get the rate cut," said Mark Garay, associate director of the tax policy services group in the Washington office of Deloitte & Touche. "The higher your income, the larger amount your saving is going to be under the Bush plan."

The president has said his plan would provide the highest percentage tax cuts to the lowest income Americans and that no one should have to give the government more than one-third of their earnings. Bush's proposal would simplify the tax rate structure, putting Americans in one of four brackets -- 10, 15, 25 or 33 percent -- and would replace current rates of 15, 28, 31, 36 and 39.6 percent.

The Bush plan also included proposals that could benefit married couples and wealthier Americans. The plan would double the child tax credit to $1,000 per child, reduce the so-called marriage penalty, eliminate the estate tax and expand charitable deductions for people who do not itemize.

Garay explained that if you are young and single you wouldn't benefit from these initiatives, but like all those who pay taxes, you would have some savings under the Bush plan.

A look at high and low average starting salaries for recent, college graduates with different educational backgrounds showed more specifically what those savings would be.

Average starting salaries for recent college graduates are likely to fall between $22,000 and $50,000, according to September 2000 information from the National Association of Colleges and Employers, a group that publishes quarterly reports about the employment of college graduates. The information, which analyzed students who pursued 70 fields of study, was compiled with survey responses from more than 180 schools across the nation.

Under current tax law, young people who earned $20,000 last year would pay $1,883 in taxes. In five years, when the Bush plan -- if implemented -- was fully phased in for those in this salary range, a worker who earned $20,000 would pay $1,583, for a saving of $300.

At the high end of the average earning spectrum for 1999-2000 college graduates were those who were paid about $50,000, like computer sciences graduates with an average starting salary of $49,055 and petroleum engineers who earned on average $50,367. Someone who made $50,000 last year would pay $8,398 in taxes under current law.

Under the administration's proposal, after the phase-in period is completed, an individual who earned $50,000
would pay $7,633, for a $765 saving over current rates.

In five years, savings for a single individual who earned $30,000 would be $300. Someone with a $40,000 salary would save $465 under the Bush plan.

The numbers indicated some savings for single people in the workforce, but it was less than that saved by their married counterparts and more wealthy individuals, Garay said.

"This helps most Americans," Garay said. "If you pay a tax you get a tax cut. But the people at the high end pay the most taxes and they get the highest tax cut."

Friday, February 16, 2001

Bush tax plan’s effect on gays depends on income level

A story published today in the Washington Blade reports that some gays will benefit more than others under the tax reduction plan proposed by President Bush.  The amount that any gay individual or couple will benefit varies with their income level.

Andrew Martin, an openly Gay certified public accountant in Washington, says that how much anyone will benefit "depends."

As always with taxes, much depends on what kind of income a person has, whether he or she has children, if he or she owns a home, and what kinds of deductions the taxpayer might be eligible for, among other factors. And political views color how people view tax plans.

"It’s very hard to talk about lesbian and gay people in a global way with regard to the tax plan," said Lee Badgett, an openly Lesbian economist at the University of Massachusetts and founder of the Institute for Gay and Lesbian Strategic Studies. "A lot depends on people’s incomes."

Sean Cahill, research director of the Policy Institute of the National Gay and Lesbian Task Force, said the Bush tax plan "would affect us pretty much the same as straight people" since gay people "earn roughly the same as heterosexuals."

Bush’s tax proposals, which are considered likely to undergo at least some changes in Congress, are already being targeted for support, criticism, and analysis by Gay groups and observers.

"There is clearly nothing in Bush’s plan that was intended to hurt or help gay people," said Patricia Cain, an openly Lesbian law professor at the University of Iowa and an expert on taxation. "We’re invisible to him and his policy people." The Bush plan, she said, is typical of the way the tax code has always regarded Gay people.

According to Log Cabin Republicans, a national Gay group, Bush’s proposal for across-the-board reductions for people in all tax brackets will benefit Gays much more than Democratic proposals to target more tax savings to working families. And the proposed Bush tax relief, said LCR spokesperson Kevin Ivers, will be the "stimulus" the economy needs right now.

Mike Colby, executive director of the Democratic counterpart to LCR, the National Stonewall Democratic Federation, said his initial reaction to Bush’s tax plan "is that any so-called benefits Gays receive are an accidental byproduct. … I really don’t think the Bush administration put any thought into helping certain segments of society. To say that it’s a great plan for Gays and Lesbians really isn’t true, unless you happen to be very wealthy."

There does not seem to be dispute about several facets of the Bush plan: While almost all taxpayers would gain tax relief, the wealthy would gain more and, said University of Iowa’s Cain, married couples would gain more than singles — the category the vast majority of gays fall into.

In announcing his plan early this month, Bush called it the "economics of inclusion." A key feature was reducing rates for all tax brackets.

Among other provisions that could have an impact on Gay individuals and families are the following:

* eliminating the estate tax, which Bush and other critics call the "death tax,"

* doubling the child tax credit to $1,000 per child, and

* expanding the charitable deduction to taxpayers who don’t itemize their deductions and therefore currently lose the tax benefit.

According to Citizens for Tax Justice, a liberal tax research group whose analyses are generally respected and often reprinted in mainstream media, almost 90 percent of taxpayers would receive less than $1,600 in tax cuts if Bush’s plan had been in effect 1999.

The Bush plan, says CTJ, would treat married couples "more generously" than other tax filers. The typical married couple filing jointly would receive an income tax cut of $1,028 under the Bush plan when it is fully in place in 2006. But the typical single taxpayer, says the CTJ, would get only $249 from the Bush plan.

Bush’s plan would also eliminate the estate tax, which Congress — with the support of most Republicans and many Democrats — voted to repeal last year, only to face a veto by President Bill Clinton.

LCR is especially enthusiastic about eliminating the estate tax, which everyone agrees discriminates against Gay couples.

A straight married person can leave assets to a legal spouse without the spouse having to pay any taxes. In contrast, because gay people cannot marry, a surviving Gay partner has to pay taxes on assets above $675,000, as the law is currently written (the amount of tax-free assets would rise to $1 million in 2006).

Although Colby of the National Stonewall Democratic Federation is critical of a number of aspects of Bush’s tax proposal, he agrees with LCR on repealing the estate tax.

"It’s something that a number of Democrats have been supporting," Colby said. "It’s something I would like to see happen. I really do think the ‘death tax’ puts a tax burden on gay and lesbian couples as well as on other segments of society."

As Cain points out, homes, works of art, and other property that contributed to the couple’s lifestyle are included in assets; the taxes on the inherited assets can force a surviving gay partner to sell things that had emotional significance.

Cahill said that, for Gay people, changing the taxation of pension plans and 401(k) plans — which are currently untaxed when left to straight spouses but taxed when bequeathed to Gay spouses — would benefit "a much larger portion "of the Gay population than repealing the estate tax.

Bush’s plan would help some of the growing number of Gay couples with children by doubling the child credit from $500 to $1000.

But Cain said that, because of the narrow definition of child, some same-sex families will not benefit. Under current law, the child must be your own child, stepchild, foster child, or adopted child to take advantage of the child credit.

The Bush plan, said Andrew Martin, the Washington accountant, would do nothing to alter what he says is the second-biggest discrimination provision in the tax code after the estate tax — the taxing of domestic partner health and other benefits.

While a straight employee can get health coverage for the entire family from an employer and pay no taxes on that benefit, a gay employee must list benefits for her or his domestic partner as additional income and pay taxes on it.

Wednesday, February 14, 2001

Arizona bill would make it harder for those 16 and under to marry

A story published today in the Arizona Republic reports that premarital counseling and the consent of both parents will be required of those 16 and under before they can marry, if Rep. Linda Binder has her way.

"It's common sense," said Binder, R-Lake Havasu City, who wants to make it more difficult for children 16 or younger to marry. Under current law, Arizonans 16 or younger need only the approval of one parent and a judge to marry.

Binder's bill also would require the marrying minor to stay in school and prove the union was voluntary.

The bill is similar to a Utah proposal targeting child marriages in polygamist communities.

Binder, R-Lake Havasu City, says she's not aiming at any one group. "I don't want any child to be coerced or enter into marriage under anyone's pressure," she said.

House Bill 2088 goes to another House committee after getting unanimous approval Tuesday from the House Judiciary Committee.