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TAX CUTS? HOW MUCH AM I GONNA SAVE?
By Lauren Ohayon

Tax cuts are a pivotal issue in this year's presidential election. Both Vice President Al Gore and Texas Govenor George W. Bush would have you believe their plan is best, but don't be fooled; their priorities are very different.

PhotoSo what's the big difference in each candidate's plan? Bush's proposal assures that all taxpayers will get a tax break, while Gore assures the same for about 94% of taxpayers. Gore's plan targets specific groups, particularly families with dependent care needs. We asked Clint Stretch from Deloitte and Touche's national tax office to crunch each of the candidate's tax numbers so we could figure out how their promises might change your tax bill. To do this, we asked him to analyze three hypothetical families, each with very different economic circumstances. Here are the results:

Family #1 represents a household earning $20,000 a year or less. Made up of a single breadwinner ($20,000 salary), a non-working parent, and two school-age kids, the family currently receives a $2,349 tax refund from the IRS, with the Earned Income Tax Credit. Under the Bush plan, they would still receive the credit; under the Gore plan, the tax credit would go up to $2,771. That's a $422 benefit.

Family #2's finances are closer to those of the average American household. Both parents work, and there are two kids: one in a public college where tuituion is $4,000 a year, and the other still school aged, but enrolled in an after-school program. In this typical family's case, the Gore-Bush tax plans result in a virtual draw; they'll both enjoy close to a $1,200 tax break.

Ah, yes, the lucky richest 6% of all taxpayers, or, for our purposes, family #3. This family earns $100,000 a year. At present, this group accounts for about half of all tax revenues. Both parents work and they have two kids, one attending a $4,000 per year public college, while the other is still in school and enrolled in after-school care. This family currently pays $12,784 in taxes. Under Bush, they'll save $2,569, but only $1,120 under Gore. Stretch says, "They're getting a bigger tax cut under Bush. That's because of the bigger child credit and because of his rate cuts. The only benefit they're getting from the Gore plan is more help with college tuition."

COMPARISON OF BUSH AND GORE TAX PROPOSALS

How much could my family save?

Family Situation Bush Plan Gore Plan
  • $20,000 income
  • One working parent, one at home
  • 2 Kids, both school age
  • currently receiving $2,349 refund
No change Save $422
  • $40,000 income
  • 2 parents work
  • 2 kids, one in public college, one in after school care
  • currently pay $1,218 in taxes
Save $1,218 Save $1,178
  • $100,000 income
  • Both parents work
  • 2 kids, one in public college, one in after school care
  • Now pay $12,784 in taxes
Save $2,569 Save $1,120

Information Copyright Deloitte & Touche 2000

What do regular people think? We spoke to random people on the street for their take on tax cuts. "I think taxes is probably my biggest issue. I think any chance they cut taxes is a plus in my book," said one person. Another agreed that she was interested in the candidate with the biggest cut: "You work hard and you feel you have nothing to show for it because the money goes right to the government. That would probably be the biggest issue in the deciding fact. Who's going to work toward cutting those taxes really, really low."

Stretch says it is a difficult choice. "The Bush plan is attractive because it's simpler. It takes the current system and it just lowers the rates, makes some items a little bigger than they were. And then you look at the Gore plan -- it's more complicated, but it's smaller."

Editor's Note:

Although some of the numbers Deloitte & Touche provided us with in our earlier taped piece came under fire by our guest, Carol Cox Wait, Deloitte & Touche stands by their findings, which showed that a family earning $20,000, with 2 school-aged kids, would get about $400 more in tax savings under Gore's proposed plan than they would under Bush's.




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