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Show Tax Cuts bring Tax Increases By Richard L. Lesher, President Chamber of Commerce of the United States Don't rush out and start spending the money you're supposed to gain from the tax "cut" Congress and the President just enacted. When all things are considered -as all things must be--you're likely to wind up farther behind than ever. Suppose, for example, that you are a single person earning $20,000 a year. According to the sample table prepared by the congressional Joint Committee on Taxation, your federal income tax should be $ . 1 17 lower for 1979 than it was for 1978. So far, so good. But the right hand giveth while the left taketh away. You will pay an extra $155.15 in Social Security tax next year. And so will your em- likely to face a net tax increase. To put things in the proper perspective, you need to know that the total tax relief just passed is about ;one half the size of the 1975 tax reduction and less than one third the size of that for 19G3. By way of faint praise, I can find two good things to say about the tax bill. First, it is a better bill than was in prospect at the start of the year, and a little better than the one the House passed last summer. Second, it does recognize the need to stimulate business investment, which would increase employment em-ployment and production and reduce inflation. The business tax releif, however, is short by a country mile, just like that offered to individuals. Business corporate tax relief ployer, on your behalf, (for someone making $22,900 or higher, the increase is $332.92.) See: Already you're behind, and we haven't even considered the effects of inflation yet. Assume that inflation runs 7 percent next year (a very conservative con-servative asusmption, I'm sorry to report). The purchasing power of your $20,000 will depreciate by $1,400. Thus, the real equation of your financial future is $117, minus $155.15, minus $1,400, leaving you worse off by $1,438.15. Of course, you might get a raise to compensate for the effects ef-fects of inflation. But then you're making more money (for tax purposes) and so paying more tax on it. The numbers vary with individual in-dividual circumstances and different wage levels, but as Senator Baker (R-Tenn.) has pointed out, every family making more than $8,000 next year is was very small, consisting mainly of a two percentage point reduction in the, corporate rate, plus a small improvement in the investment tax credit. The tax relief enacted to encourage en-courage business investment amounts to 0.16 percent of our Gross National Prduct, or $3.7 billion. Contrast that figure with the tax relief provided for individual in-dividual investors in 1975, which equalled 0.27 percent of GNP (equivalent to $6 billion in today's economy); or the 1963 investment tax relief at 0.77 percent of GNP. Even the proporition of the total tax relief aimed at stimulating business investiment is much less than in the past: One -fifth for 1979, compred to one-fourth one-fourth in 1975 and one-third in 1963. Real tax relief is still needed for both business and individuals, rather than token sums cast out to hungry voters prior to national elections. Campaign year, housing crooks, heed advice, middle class, meaningless, enforce laws |