The Candidates’ Tax Proposals - Crunching the Numbers - part 2

This column, in slightly different format, originally appeared in The San Francisco Examiner Newspaper, October 29, 2000.

Copyright 2000  Robert L. Sommers, all rights reserved.

The Candidates’ Tax Proposals

Adding fuel to the tax cut debate, last week IRS released statistics for the 1998 tax year (the latest year available) showing that the effective tax rate for the wealthiest 1% (adjusted gross incomes of $269,496 or higher), actually dropped from 27.9% to 27.1%. This group paid 34.75% of all income taxes paid by individuals.

Both presidential candidates use the Office of Management and Budget’s projection that, based on current economic activity and government spending, we’ll have a $4.56 trillion surplus in 10 years. Texas Governor Bush proposes a $1.3 trillion tax cut accomplished by reducing current income tax rates. Vice-President Gore counters with a suggested $480 billion tax cut generated by specific deductions and exemptions aimed at lower and middle income taxpayers (those earning between $100,000 and $110,000). Gore offers a smaller tax cut because he favors paying down the national debt which, he claims, will save the government $300 billion in interest payments over 10 years.

Both candidates would extend the charitable deduction to taxpayers who do not itemize and both would raise the thresholds for phasing out the child tax credit from $110,000 to $200,000 for joint filers, and from $75,000 to $200,000 for single parents. Bush would increase the current per-child tax credit to $1,000, while Gore favors the current $500 per-child credit.

The candidates differ on fixing the marriage penalty: Gore would double the standard deduction for joint filers, while Bush favors a 10% deduction for two-earner families to a maximum of $3,000.

The Bush Proposal – Lowering Marginal Tax Brackets

Single Taxpayer

Taxable Income

Current Law

Bush Proposal


15% on excess over 0

10% on excess over 0


900+15% on excess over 6,000

600+15% on excess over 6,000


3,937 + 28% on excess over 26,250

3,637 + 25% on excess over 26,750


14,381 + 31% on excess over 63,550

12,962 + 25% on excess over 63,550

132,600 – 288,350

35,787 + 36% on excess over 132,600

30,525 + 33% on excess over 132,600


91,857 + 39.6% on excess over 288,350

81,923 + 33% on excess over 288,350

Thus, under the Bush proposal, a single person (standard deduction with one exemption) with a taxable income of $50,000 would receive a 10.5% tax reduction worth $911. If the taxpayer made $500,000, he would receive a 14% reduction worth $24,355. The conclusion: Despite the claims to the contrary, Bush’s income tax reductions favor the wealthiest taxpayers, both in actual dollar amounts and in the percentage of tax reduction.

Married Filing Jointly

Taxable Income

Current Law

Bush Proposal


15% on excess over 0

10% on excess over 0


1,800 +15% on excess over 12,000

1,200+15% on excess over 12,000


6,577+ 28% on excess over 43,850

5,977 + 25% on excess over 43,850


23,965 + 31% on excess over 105,950

21,502+ 25% on excess over 105,950

161,450– 288,350

41,170 + 36% on excess over 161,450

35,377+ 33% on excess over 161,450


86,854 + 39.6% on excess over 288,350

77,254+ 33% on excess over 288,350

Under the Bush proposal, joint filers (standard deduction with two exemptions) with taxable income of $75,000 and $750,000 would receive the following tax benefits: an 11% reduction worth $1,326 and a 15% cut worth $40,136, respectively.

Alternative Minimum Tax

Now, factor in the Alternative Minimum Tax: Suppose the single person making $500,000 a year in wages and the married couple earning $750,000 a year in wages also had $200,000 worth of incentive stock options (a preference under the AMT). Note: For simplicity, there are no other income sources and no itemized deductions. TurboTax’s Tax Estimator software was used to determine these numbers. The result: There is no advantage to the single filer and the couple’s $40,136 tax break is reduced to $4,900. Thus, what the Bush tax cut offers, the AMT overrides.

Single Taxpayer


Bush Proposal


Regular Tax








Total Tax




Tax Savings





Joint Filer


Bush Proposal


Regular Tax








Total Tax




Tax Savings




The Gore Approach – Targeting Tax Relief for Certain Taxpayers

The Gore proposal specifically targets certain economically disadvantaged groups with selective tax breaks. For instance, Gore wants to provide a $500 tax credit to poverty-level families with three or more children. He also has tax deductions for education and life-long learning.

Al Gore wants to target tax reductions to lower and middle-class taxpayers who incur certain types of expenses which is contrary to George Bush’s approach. It is the opposite approach from George Bush. The following are the major tax breaks for individuals:

Tax Break



College Tuition Deduction

2,800/yr - 10,000 max.

Joint AGI 100,000 - 120,000

401(j) Account

2,500 contribution for education

No tax deduction, but tax-free withdrawal

After-School Tax Credit

50% of expenses

Limitations not described

Heath Insurance Tax Credit

25% refundable credit

Limited to those without heath insurance

Long-Term Care

3,000 tax credit

AGI phase-out at 110,000

Disabled Workers Credit

1,000 credit for disabled workers

Phase-out: Joint at 110,000

Stay-at-Home Parents

500 credit

Limited to caring for a child under one year old

Tuition Savings Plan

Tax and inflation-free savings accounts for college

Similar to a Roth IRA, but targeted for education

Earned Income Credit (EIC)

500 increase for families with 3 or more dependents; with more favorable provisions for the general EIC

Difficult to analyze because of its complexity

Retirement Savings Plus Accounts

Tax-free voluntary accounts with government matching

Supposed to supplement Social Security benefits

Estate Tax Relief

Increase the current exemption for small businesses and farms from 1.3 million to 2.5 million and allow the credit to transfer to a surviving spouse

No increase in the scheduled exemptions for individuals and no elimination of estate taxes

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All contents copyright 1995-2003 Robert L. Sommers, attorney-at-law. All rights reserved. This internet site provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet® is a registered trademark of Robert L. Sommers.