
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, May 16, 1993                   TAG: 9305160003
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-3   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

NEW TAX BILL WOULD TRIM BURDEN ON LOW-PAID WORKERS

President Clinton's tax bill, which would nip most middle-income families and sting the rich, would reduce the federal tax burden on many of the poorest working Americans.

Clinton wants to expand the earned-income tax credit, an 18-year-old program that is popular in both political parties, to help the poor offset his proposed energy tax.

With the bill, Clinton said last week, the government "will say for the first time [that] people who work 40 hours a week with children in the home would be lifted above poverty."

The $28 billion expansion would raise 2 million people above the poverty line.

The bill, endorsed by the House Ways and Means Committee, would raise taxes by about $246 billion over five years to reduce the federal deficit. In addition to the energy tax, it includes a big increase in income taxes on the well-to-do.

The earned-income credit rewards more than 13 million families for keeping their jobs and staying off welfare. The credit can offset all or most of a family's tax; if there is no liability because income is so low, the government will mail a cash payment.

For the first time, the credit would be extended to childless people age 22 or older who may not be claimed as dependents by their parents.

Some of the credit is available to families with adjusted gross incomes as high as $23,050; the maximum saving is $2,364. The bill would open the credit to families making up to $28,000 with a top credit of $2,685.

A single person with income up to $9,000 could qualify for the first time; the maximum credit would be $306.

Some other winners and losers in the bill:

WINNERS

The self-employed: While a corporation may deduct the full cost of medical insurance for employees and their families, a self-employed person may not. The bill would allow the self-employed to write off 25 percent of the cost, but only through Dec. 31.

Investors in small businesses: The bill would allow a person to avoid tax on half the profit from the sale of original stock in a small corporation if the shares were owned five years or longer.

Real-estate professionals: They would get a good measure of relief from a 1986 crackdown on tax-shelter activities known as "passive losses." Within limits, they could use such rental losses to shield other income from taxation. On the other hand, investors would have to depreciate or write off nonresidential real estate over 39 years, rather than 31 1/2 years under present law.

LOSERS

Taxpayers who cheat on deductible contributions: Any donation of $750 or more would have to be backed up by a receipt; a canceled check wouldn't do.

Lobbyists: Expenses of attempting to influence legislation would no longer be deductible.

Those who enjoy "three-martini lunches" and taxpayer-subsidized entertainment, and the businesses based on them: The share of meals and entertainment expenses that could be deducted for business purposes would be cut to 50 percent from the present 80 percent. Most club dues would become nondeductible.

by CNB