The Taxing Details of Landmark Legislation

August has been an extremely eventful month in our nation’s capital. Not only was a balanced budget bill signed into law, but President Clinton became the first chief executive to use the long sought after line-item veto. Americans across the country have been closely following these historic developments to the extent that, if threatened with physical harm, a large number quite possibly could locate Washington, D.C., on a well-marked, large-print map of the United States.

Which isn’t to imply that we average citizens have lost interest in anything remotely related to the federal government. Staying abreast of legislative activities still ranks high on our priority lists, often just below other crucial activities--such as learning how to whittle.

We are indeed fortunate to have lawmakers who are well-known for their ability to consistently craft documents that couldn’t be any easier to understand unless they were written entirely in Latin, put through a paper-shredder, and then placed in the path of a tornado.

Consider the recently enacted budget and tax-cut plan. After reviewing numerous articles on this subject, I understood every aspect of the plan so well that I was able to develop the following highly informative question-and-answer fact sheet.

Question: What specific actions will be taken to balance the budget by 2002?

Answer: I didn’t see one single mention of the phrase “specific actions.” On numerous occasions, however, I did encounter the phrase “summer recess.”

*

Q: Why was the year 2002 chosen?

A: According to many economists, a balanced budget could easily have been achieved by 1998. So, logic suggests that 2002 was designated because it comes after 2001 and before 2003.

*

Q: The budget agreement cuts taxes some $95 billion over the next five years. Who will benefit most?

A: The greatest benefit will be enjoyed by that segment of the population generally categorized as “everyone but you.”

*

Q: The package also brings with it about $130 billion in new spending. Who will this benefit?

A: See previous answer.

*

Q: The bill gives parents a $400 tax credit for each child age 16 and younger in 1998, and $500 for each offspring thereafter depending on annual income, marital status, zodiac sign, shoe size. . . . Does this mean that if I currently don’t have children, I’d be well-advised to produce some--or, if I do, that I should have more?

A: No. They could grow up and become members of Congress.

*

Q: Tax credits also are available for families who have children in college. Would this suggest that I should strongly encourage my kids to pursue a higher education?

A: See previous answer.

*

Q: What can you tell me about the top tax rate for capital gains dropping from 28% to 20%?

A: Absolutely nothing. After coming across the sentence, “When they sell their primary house, couples pay no tax on the first $500,000 in profit,” I saw no reason to read further.

*

Q: What do you know about the estate tax exemption being raised from $600,000 to $1 million?

A: Approximately zero, which is actually a great deal more than I need to know for this particular lifetime.

*

Q: What about native Alaskan whaling captains. How did they make out?

A: These individuals now can deduct up to $7,500 annually in expenses.

*

Q: What type of expenses?

A: I’m thinking dry cleaning.

This landmark piece of legislation contains numerous other provisions that will, among other things, enable your tax preparation professional to send you a very large bill. Unfortunately, there isn’t time to explore these issues, as I have a whittling class to attend.

* Carrie St. Michel’s e-mail address is CarrieStMichel@compuserve.com.