Those Competing Tax Plans (7/4/97)
AllPolitics Watergate Special Report (6/16/97)
What We Didn't Find At The Great Tax Bazaar
By Charles Bierbauer/CNN
WASHINGTON (July 31) -- By the time they were done there was something in the tax cuts for just about everyone. Well, maybe not if you have no spouse, kids or house. But, hey, this is politics.
President Bill Clinton stretched the $500-per-child credit to reach low-income working families. Republicans rewarded long-term investors with capital gains rates as low as 18 percent.
In between, middle-class Americans who were ostensibly to be the prime benefactors of the tax cuts got kid credits, college tuition breaks and broader access to IRA accounts.
By the time the tax cut negotiators were done, though, the happiest people were the tax accountants. Tax time is going to be more complicated.
"That's where people like me come in and are happy the new tax law looks like it is going to go into effect," says tax attorney Joel Weingarten.
"Rather than simplifying things, there is an added layer of calculations, information record keeping, that sort of thing."
American taxpayers may like the better bottom line they are likely to find on their 1997 tax returns. They won't like getting there.
Ironically, it may force more low-income families to spend their money on tax preparers. One of the more complex formulas which will have to be sorted out is the one which integrates the child credit with the Earned Income Tax Credit now received by families with lower incomes.
"The forms for the Earned Income Tax Credit are 27 pages in the instruction booklet, and already we have people of low income that should be doing 1040EZ on their weekend are now taking it to H&R Block," says House Majority Leader Dick Armey. The Texas Republican says that's one of the "real shames" of the tax code.
One tax accountant tells me EITC recipients are even more likely to seek cheap help -- somebody's cousin, a moonlighting neighbor, Joe's Towing and Taxes -- and get bad advice.
Tax preparers now await the arrival of what they call "Package X" -- their annual forms and instructions from the Internal Revenue Service. The IRS says it's at work on an approximately 100-page plan, rewriting its computer programs, gearing up its training sessions.
"I'll be going back to school, taking some seminars," says tax attorney Weingarten. "I don't have too much hair left to pull out."
It was the politicians more than the taxpayers who were clamoring for these tax cuts. What taxpayers say they'd most like is a simpler tax filing process. This is not it.
"None of this changes the pressures to throw the entire income tax out," says Rep. Bill Archer, the Republican chairman of the House Ways and Means Committee.
Archer means real tax reform, not tax cut tinkering. Tax legislation starts in his committee.
Archer favors some form of consumption tax on what we spend, not what we earn. Armey, on the other hand, has long touted a flat tax -- one 17 percent rate for everyone -- that could be filed on a post card-sized form.
"My flat tax proposal is still alive and well with the American people and it's on its way to becoming the law of the land before I retire from Congress," Armey says. Armey is, however, only 57. He is in his seventh term in the House, and there are no term limits.
For now, just getting taxes cut for the first time in nearly two decades has been arduous enough for Congress and the White House for now.
"It won't happen next year, but I think it will be a significant issue in the campaigns next year and we'll have an opportunity in 1999," says Archer. Two years ago the chairman told me the opportunity would come in 1997.
"We've got a president who isn't sold on the idea, and we've got to work toward getting him in the right frame of mind to understand how much this will do for the country," Archer adds.
No future partisanship should diminish the current accomplishment, though. Skeptics had plenty of opportunity to doubt it would come about. Even after the parallel celebrations Tuesday on the White House lawn and Capitol steps, there were changes still being made and others sought.
President Clinton threw in a late veto threat if families were allowed to withdraw IRA savings to pay private school tuitions through high school, rather than college. The provision was pulled. Archer says he headed off other post-agreement changes. But he also says this is "just the beginning."
"We look forward to building on it in the next Congress, particularly while the economy continues to improve and revenues increase," says Archer. "If we can keep the breaks on spending, we should have room for another tax reduction next year."
Of course, it won't be simple getting there. And it won't be simple figuring it out on the tax forms. Tax accountants can count on that. It makes them happy even it baffles the rest of us.
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