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4 Proposals Offer Varied Paths to Tax Law Revision

<i> From a Times Staff Writer</i>

Tax law revisions will be the topic of discussion when the House Ways and Means Committee opens hearings in Washington today. Here are some highlights of the major tax-cut proposals that will be considered:

The Rostenkowski plan, offered by Rep. Dan Rostenkowski (D-Ill.), committee chairman:

--Provides a reduction for two years of 20% of Social Security-Medicare payroll taxes; the reduction is limited to a maximum of $200 a year for individuals and $400 a year for couples who earn between $20,000 and $75,000. Low-income people who pay no income tax would get refunds from the Treasury. The plan would permanently raise taxes on individual incomes of more than $85,000 a year and joint incomes of more than $145,000 a year by creating a 35% top-bracket rate. It also would impose a 10% surtax on that part of income exceeding $1 million a year.

The Bentsen plan, sponsored by Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee:

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--Provides a $300 tax credit for every dependent child under 19, to lower taxes for families. People who owe no tax would not be eligible. It also would restore a $2,000 deductible contribution to individual retirement accounts (IRAs) for an estimated 20% of people who earn more than $50,000 a year, who are not now eligible for IRA deductions. Penalty-free withdrawals from IRAs could be made for first-time home purchases, medical bills and college expenses.

The Gingrich-Bush package, proposed by House Minority Whip Newt Gingrich (R-Ga.), and endorsed by President Bush:

--People who earn less than $50,000 a year would be able to exclude from taxable income interest earned on savings accounts, up to $225 for an individual and up to $450 for a couple, in 1992 and 1993.

--Would gradually increase the amount Social Security recipients could earn without penalty, from the current level of $9,720 a year to $17,600 over the next five years.

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--Enacts Bush’s plan to reduce the tax on capital gains, or profits from the sale of assets such as stocks and bonds or other property held for more than a year. Also, the plan would adjust the capital gains tax rate to allow for inflation, a process known as indexing, in the future.

--Repeals the luxury tax on boats, aircraft, cars and jewelry enacted in 1990.

--Reopens IRAs for all; permits penalty-free withdrawals for first home purchases.

--Partially restores a tax break for real estate investors that was repealed in the major overhaul of tax shelters in 1986.

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--Raises from $14,000 to $100,000 the amount of first-year business write-offs allowed for equipment purchases.

The Downey-Gore plan, offered by Rep. Thomas J. Downey (D-N.Y.) and Sen. Albert Gore Jr. (D-Tenn.):

--Replaces the $2,300 personal exemption with an $800 tax credit for each child under the age of 18. People who do not earn enough to pay tax could receive the credit as a payment from the Treasury. It also would enlarge the earned-income tax credit, designed to help working poor families. To pay for the tax credits, a new top-bracket rate of 35% would be levied against incomes of more than $130,000, along with an 11% surtax on adjusted gross incomes above $250,000.

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