Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, December 31, 1993 TAG: 9312310086
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: The Baltimore Sun
DATELINE: WASHINGTON LENGTH: Medium
But millions of working poor families will find themselves a little richer as dozens of tax changes go into effect Saturday. The changes, which will raise billions of dollars for the federal government, are part of President Clinton's fiscal 1994 budget.
"This particular set of tax changes is consistent with the goal of the budget bill as a whole, which was to increase taxes on the relatively high-income people and actually cut taxes for lower-income working people," said Randall Weiss, tax analyst with Deloitte & Touche, Washington.
To reduce the deficit by $496 billion over the next five years, the administration and Congress agreed in August to raise $241 billion in new taxes and cut $255 billion in federal spending. According to the Congressional Budget Office, 90 percent of the new taxes will be paid by families and individuals with incomes above $100,000.
Some of those taxes already are in effect, including an additional 4.3 cents on the federal gasoline levy, which was introduced Oct. 1, and the increased top income tax on the rich, which was backdated to Jan. 1, 1993.
Couples with taxable incomes above $140,000 and individuals above $115,000 will be taxed at 36 percent instead of 31 percent. For those with taxable incomes above $250,000, there will be a further surtax of 10 percent, making their top marginal rate 39.6 percent.
The wealthy will take another hit this week, as the $135,000 wage ceiling is eliminated on payment of the 1.45 percent payroll tax for Medicare hospital insurance. The tax now will be applied to all wages. This will raise $29 billion in new revenues.
The next biggest increase will force well-off retirees to pay $25 billion in higher taxes over the next five years on their Social Security benefits. The maximum percentage of Social Security income subject to tax will increase from 50 percent to 85 percent on individuals with income exceeding $34,000 and couples above $44,000.
The American Association of Retired Persons estimates that 5.5 million retirees, or 15 percent of the older population, will face higher taxes on Social Security benefits.
Another tax change will reduce from 80 percent to 50 percent the deductions that corporate executives can claim on business meals and entertaining, estimated to be a $38 billion-a-year business. Uncle Sam expects to ring up $15 billion in tax revenues from that change over the next five years, but it could hurt the restaurant industry.
New limits will be imposed on the deductibility of job-related moving expenses, and the distance traveled for any eligibility is increased from 35 to 50 miles. The costs of selling a residence or acquiring a new one during a job transfer are no longer deductible. If expenses are reimbursed by an employer, they will represent taxable income to the employee.
And for those generous enough to give single charitable donations of more than $250, there will be no tax deduction unless they produce a detailed receipt, which adds a new layer of bureaucracy to charity administration.
A major piece of federal largesse will help the working poor by almost doubling the earned income tax credit. An estimated 11 million families will benefit from an average increase in benefits of $800 a year.
by CNB