President Bush recently praised a $350 billion tax cut measure
passed by Congress. For months Bush has been pushing for a large
tax cut, claiming it will help average Americans endure a sluggish
economy. But average Californians should think again if they
believe Bush’s policy will help them ““Â especially
if they are sending a child to the University of California.
There are plenty of arguments against Bush’s tax cut
plans. Many opposed to cuts say giving money back when the country
is in serious deficit is an unwise move. Others point out that huge
cuts are never made after war ““ the cost of which is still
not completely known. Furthermore, many people note that
Bush’s tax cuts clearly benefit the richest Americans most
““Â a family with an annual income of just over $60,000
will only get a tax break one-third the size of a family making
about twice that much.
But Californians need not look to history or economics books to
understand why these tax cuts are a bad idea. They can just turn to
their state’s government, which is struggling to fill a $38
billion hole.
Despite Republican promises, California’s budget crisis
will not be solved without raising taxes. Also, Californians will
be expected to pay higher fees for state-subsidized programs, like
higher education. Even if Bush’s philosophy ““ that
cutting taxes, even in times of war and deficit, is the best way to
heal an ailing economy ““ is accepted, the tax and fee
increases state and local governments will be forced to make will
largely off-set the cuts. And in California, middle income families
will benefit the least.
A family with two children under 17 years old and a household
income of $63,000 will save approximately $1,100 under the federal
tax cuts. But if that family plans on saving to send one of its two
children to a UC campus, they can kiss the tax break goodbye. A fee
increase of $405 per year already passed earlier this year and
another of $795 per year will almost surely be voted through soon
““Â the total increase would be $1,200.
That same family will also likely face an increase in the
vehicle license fee and will have to spend its own money for
services previously provided with the help of state money, as
programs are cut across the board.
Wealthier Americans will reap larger benefits from the tax cuts.
A family with an annual income of $170,000 will get about $3,148
back. A family making $530,000, $13,422 back.
But while Bush relies on this freed-up cash to jump-start the
economy, even tax cuts for the wealthy will be off-set by local tax
increases. In California, Gov. Gray Davis has proposed creating a
new tax bracket ““ with the increased taxes ““ for
singles who earn over $150,000 or married couples who earn
$300,000.
The problem is not unique to California. Numerous news reports
have documented the frustration of governors across the country
““ Democrats and Republicans ““ who must make the
unpopular decision of raising taxes, even as the federal government
lowers taxes. The recent tax package does give some money to states
for budgetary relief ““ an idea Bush initially opposed. But
the amount allocated is modest at best, especially since the
federal government is asking states to endure increased security
costs to combat terrorism.
Given the country’s economic climate, states now have to
make difficult decisions on where to cut and raise fees.
Middle-class families will be hit hard because the federal
government decided to provide a small bandage when what states
really need is more extensive aid.