In 1992, the then-future ex-President Clinton and his kick-the-side Algore,
campaigned on a middle-class tax cut.  When they won the election, the
first thing they did was to get a massive tax increase passed.  The largest
tax increase ever.  Beyond taxing the social security benefits of seniors,
they raised the maximum tax rate from 36% to 39.6% and made the change
retroactive to Jan 1, 1993.  This means that some people got a massive,
unanticipated, tax bill that year.  As most everyone knows, when you get in
the higher tax brackets, say if you make more than $20,000 and you have
stock, you plan the tax liability for the coming year, or you should.
 Since the affected people were comparatively few in numbers, the outcry
was minor.

When President Bush campaigned in 2000, he did so on tax relief.  He did
not talk about a middle class tax cut, he talked about tax relief for
everyone who pays federal income taxes.  When he took office, it was the
first thing he worked on.  The demagoguery emanating from the opposition
with respect to this issue was something to behold.  To hear them explain
it, the fact the US is running a surplus, which was projected by
ex-President Clinton to reach $5 trillion in 10 years, was not sufficient
to allow a $1.35 trillion tax cut over the same period.  Then, the
opposition tried to get everybody a tax cut, especially the people who do
not pay federal income taxes of any kind!?!?.  They tried to change the
concept of tax relief to one of a new entitlement.  Some of you might
remember the grandstanding that was done with cars.  "Under the Bush tax
cut plan, the rich will get a Lexus and the middle-class will get a
muffler."  What was not mentioned is that the person who would get tax
relief equivalent to the price of a new Lexus, was already paying in taxes
the equivalent of the price of a fleet of Rolls Royces.

Clinton was able to massively increase taxes on less than 5% of the
population.  Too small a group of people to worry about at election time.
 In the US, 1% of the wage earners pays 25% of all federal personal income
taxes, 5% pays 51% of same and the bottom 50% of wage earners pays less
than 5%.  So you can plainly see that if you offer tax relief and say you
will give back wage earners their money, (which it is,) you will give back
more money to a high wage earner than you will to a low wage earner.  In
this day and age, there are many times more low wage earners than there are
high wage earners, ergo, any tax relief plan is slanted towards the rich.
The fact they are the ones paying the taxes in the first place has nothing
to do with reality, according to the opposition.

At any (tax) rate, (a little taxing humor here,) President Bush delivered
on his promise of tax relief.  When he did so, the opposition immediately
tried to make it into a bad thing.  For instance, did you know this tax cut
has already busted the budget everywhere?  The federal government has no
money for anything any more.  Never mind that the US is on track for a
$200+ billion surplus this year and federal spending has not been cut.
 Facts do not matter to the opposition.

The first year's tax relief is where the bottom tax rate of 15% went down
to 10%.  Every wage earner that pays taxes is affected by this change.
 Anyone who is in a higher tax bracket gets the first $6,000 dollars taxed
at 15%  now 10%.  This year, 2001, this 15% rate ($900) dropped to 10%
($600) and Bush got this drop to be made retroactive to January 1, 2001.
 The refund check is simply the difference between 15% and 10% ($300) on
everyone's 2001 tax bill.  Without the tax relief legislation, no one would
get this money, now or at income tax refund time.  Every wage earner's
first $6,000 dollar income would still be taxed at 15% ($900).  Those who
file "married filling jointly" will get up to $600, because the 15% tax
bracket goes up to $12,000 for these people.  This is the first time, we
actually get a fiscal break.  We usually pay more because of the marriage
penalty.

The mechanism used by the IRS to return that 5% overcharge is the subject
of Wirt's post.  He is also trying to create a problem where there isn't
one.  If your regular refund is $1000 every year, then this year's refund
would be $1,300.  The IRS is sending you $300 right away.  You will go
through the regular mechanism and get your other $1,000 at income tax time.
 For the vast majority of wage earners, this will be a no-brainer.  There
are always corner cases and these corner cases are the ones Wirt was trying
to turn into a majority.

By the way, Federal Income tax refunds are not taxable.  It is the state
income tax refund that is taxed by the federal government, because you used
that refund to reduce your federal income tax liability.  This only applies
in the states that have income taxes.  Texas, along with several other
states, does not have a state income tax.  In any event, this refund will
not be taxed by anyone.  This is clear money, the result of a promise that
was kept by our President.  Imagine that!

Some of you say "I would rather a needy person have this money rather than
me."  That is entirely your choice.  You can immediately give it to an
organization such as The Salvation Army, which will ensure that most of the
money gets to a needy person, rather than feed a (federal-type) bureaucracy
(like United Way) where only 5 or 10 cents on the dollar would actually get
to a needy person.  And you can deduct that gift from your taxes.

Kind regards,

Denys. . .

Denys Beauchemin
HICOMP
(800) 323-8863  (281) 288-7438         Fax: (281) 355-6879
denys at hicomp.com                             www.hicomp.com

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