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

DATE: FRIDAY, December 16, 1994                   TAG: 9412160058
SECTION: NATIONAL/INTERNATIONAL                    PAGE: NATL/INTL   EDITION: METRO 
SOURCE: MARTIN CRUTSINGER ASSOCIATED PRESS
DATELINE: WASHINGTON                                LENGTH: Medium

UNCLE SAM'S LOSS MAY NOT BE YOUR GAIN

Don't plan on filling your pockets from any of the three tax-cut proposals on the drawing board. All are long on rhetoric about helping the downtrodden middle class but short on the bucks to pay for more than pennies a day in tax relief.

There is a reason for that. Tax relief to the middle class can get expensive very quickly. With a law requiring that any tax cuts be offset by spending reductions, the economics of the situation become apparent.

Of course, the whole process has more to do with politics than economics. Economists believe tax cuts should come only when there is a need to boost the nation out of recession - hardly the situation today, with the Federal Reserve boosting interest rates to slow the economy down.

But after Republicans' landslide victory with talk of less government and lower taxes, no politician wants to listen to a bunch of economists.

House Minority Leader Dick Gephardt's approach would offer tax relief to every family making less than $75,000 a year, regardless of whether or not they have children.

Outlining his plan Tuesday, he didn't say how much money each family would get, but government statistics show that even $200 per family - less than $4 per week - could cost $21.4 billion annually.

The latest Internal Revenue Service statistics show 107 million taxpayers, 94 percent of the total, had pretax incomes under $75,000.

That $21.4 billion estimate, $107 billion over five years, also is the price tag the Republicans have put on the centerpiece of their tax relief program - a $500 tax credit per child for families earning less than $200,000 annually.

A family making $100,000 with two children would have taxes reduced $1,000. But the 64 percent of taxpayers with no dependent children would get nothing.

Democrats complain that the Republican program, by offering a tax credit rather than a refund, would do nothing for working families so poor that they pay no taxes.

Clinton proposed a $500-per-child tax credit for families earning less than $75,000 a year, with children qualifying up to age 12.The cost of Clinton's proposals was estimated at $60 billion.

In contrast, the price tag on the Republican ``Contract with America'' package was put at $184 billion over five years, including rolling back tax increases on Social Security recipients, a cut in the capital gains tax and other business tax breaks.

The betting is that whatever tax relief gets passed next year will be far below the Republican contract plan. Both parties have put Social Security and other popular entitlement programs off limits for budget savings. These programs and interest on the national debt account for two-thirds of the total budget.

by CNB