4 Proposals Offer Varied Paths to Tax Law Revision
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:
--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.
--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--Partially restores a tax break for real estate investors that was repealed in the major overhaul of tax shelters in 1986.
--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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