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Democrats unveil alternative tax plan

Published Oct. 10, 2005

Democrats on the House Ways and Means Committee completed work Friday on a tax plan offering a $200 credit for most workers, tax cuts on capital gains and new measures designed to stimulate the economy.

The plan will be considered by the House as early as next week as the Democratic alternative to President Bush's proposal.

The bill would cut taxes by about $90-billion over the next five years, chiefly for people making under about $80,000 a year. It would raise other taxes by the same amount, and most of the money would come from the well-to-do.

Preliminary estimates indicated families whose after-tax incomes average $37,286 would realize a $285-a-year savings from key parts of the Democratic bill. The richest 1 percent, with incomes averaging $392,025, would pay an extra $11,184 a year.

"I think this will pass on the House floor _ I really do," said Rep. Beryl Anthony, D-Ark. Asked whether it can win sufficient Republican support, he replied, "It'll give them heartburn to vote against it."

The bill is essentially the one recommended Thursday by Chairman Dan Rostenkowski, D-Ill. However, the Democrats' proposed reduction in taxes on capital gains, which are profits from the sale of investments, is considerably less generous than Rostenkowski offered and far less than Bush recommended.

"We must really be doing our job because we're irritating them downtown" in the White House, Rostenkowski said.

Democrats hope to use the election-year legislation to prove theirs is the party of "tax fairness," in contrast to what they perceive as too much tax relief for the rich over the past decade.

The heart of the plan is a tax credit of up to $200 per wage earner in each of the next two years; a couple could get up to $400. The size of the credit depends on a worker's wages, but about 80 percent of all workers would get the maximum credit.

On the other hand, the 31 percent top tax rate would be raised to 35 percent, affecting generally single people with incomes over $100,000 and couples over $200,000. In addition, a new surtax would be imposed on those with taxable incomes over $1-million a year.

The bill would allow many people to tap into their Individual Retirement Accounts in order to buy a home or pay for medical or education expenses. But it dropped the $5,000 tax credit that Bush wanted for some home buyers.