This is how Bush costs charities billions:
Every year, many of America's richest citizens give lots of money to charities and universities rather than give that money to the government in the form of taxes. In 1997, billion went to charities and universities, three-quarters of which was given by the richest 1 percent of Americans. Many people also leave large charitable donations at their deaths rather than pay that money to the government in the form of taxes. Tax deductions for charitable contributions further encourage these donations.
David Joulfaian, a tax analyst at the Treasury Department, estimates that charitable contributions by the living rich would decline by billion each year in the absence of an estate tax; charitable bequests would decline by another billion. That is a loss of billion in charitable donations every year. The Bush proposal that offers the most to America's charities is the Charitable Giving Tax Relief Act, which has a fair amount of bipartisan support. The bill encourages more people to give more money to charities by expanding the definition of a charibtable organization. According to the Alliance for Children and Families, the bill would increase charitable donations by billion every year. Unfortunately, that billion bonus for charities will not compensate for their billion loss if the estate tax is repealed.
The estate tax is not the only way in which the Bush agenda will aggravate existing inequities in the tax system. A lot of attention has been paid to Bush's revision of the tax brackets, replacing the current tax rates of 15, 28, 31, 36 and 39.6 percent with brackets of 10, 15, 25 and 33 percent. Bush described this "simplification" as an effort to address inequities in the tax code.
The Bush plan pays lip service to America's poor by lowering the tax rate from 15 percent to 10 percent for citizens earning between auto/mag_spr01_bushcon.pl and ,000. But it is important to realize that citizens earning less than ,000 already pay very little in income tax. Their largest tax burden by far comes from payroll taxes, the majority of which are deducted from their paychecks by employers. The Bush plan does not address payroll tax cuts at all.
While Americans earning between ,000 and ,000 get no tax break under the Bush plan, those Americans earning more than ,500 get a tax rate reduction of 6.6%. This highlights the fact that the Bush tax bracket two-step is actually regressive. So much for redressing inequities in the tax system. According to Citizens for Tax Justice, "the bottom 60 percent of all taxpayers would get an average tax cut of ; the wealthiest 10 percent would get an average tax cut of ,520, and the wealthiest 1 percent would get an average tax cut of ,853 annually when everything is phased in."
The richest 1 percent of Americans pay the most in income tax and should, perhaps, benefit the most from an income tax cut. But the Bush plan benefits these Americans disproportionately to the amount they contribute.
Some of Bush's proposals are likely to benefit some college students and their families. Bush said he would fight to make pre-paid tuition accounts tax-exempt and to raise the limit in those accounts for private colleges and universities. He also said he would nearly double federal funds for the 195 recognized Hispanic-serving colleges. And in line with his emphasis on the efficiency of state government, Bush plans to set up a matching-funds program in which federal grants would help states organize merit-based scholarship programs.
The Bush program would also raise the value of Pell Grants -- the primary source of federal financial aid to working-class students -- during those students' freshman years. Increasing Pell Grants by billion over five years, says Bush, could make college a real opportunity for up to 800,000 new students every year.
But our country would be worse off if more students are attending college in an America that is preoccupied with tax relief at the expense of poverty relief. And in the end, a rise in GDP will not matter if its increases are not put to their proper use.
Adam P. Frankel is a sophomore in the Woodrow Wilson School of Public Policy at Princeton University and is president of the Princeton College Democrats.
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