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GOP budget: Tax breaks at a cost

Most Americans would gain tax cuts but lose government services under the budget plan endorsed by GOP congressional leaders.

But if state and local governments try to make up for those lost federal services, you may very well spend money from your federal tax cut on higher state and local taxes.

The GOP budget plan aims to overhaul the way government works so that federal deficits can be eliminated by 2002. The sweep of change it envisions would directly affect every American.

Under the Republican plan _ expected to come to the House and Senate floors in a few days _ most families could subtract $500 from their tax bill for each child 18 and younger.

Homeowners, investors in stocks and bonds, and businesses would pay lower taxes on profits they earn from the sale of assets. Two-income married couples, when filing jointly, would no longer pay higher taxes than two single people with the same incomes. The average tax break would be an estimated $145 per couple.

Those and other tax breaks are the big goodies the deal would deliver _ assuming congressional tax-writing committees follow the GOP leadership's script _ but it also would impose some sacrifices.

Medicare beneficiaries likely would have to pay higher medical bills, and more seniors would be funneled into managed care systems. Riders of Amtrak trains and urban mass transit lines would have to pay more for those services or see their quality decline, or both.

And state and local taxpayers would have to pay higher tabs to clean their water and build their highways because the GOP plan would slash federal subsidies. States also would gain far greater discretion over the amounts and terms of their welfare payments.

"They are trying to devolve responsibility for making those decisions to the state and local governments," said Susan Tanaka, vice president of the Committee for a Responsible Federal Budget, a bipartisan research group dedicated to ending deficits.

"States that decide these activities are important could replace (federal subsidies) through higher taxes or by altering priorities."

The driving goal of the GOP plan is to eliminate deficits by 2002. Eventually, that should benefit all Americans indirectly, most economists agree, by lowering interest rates and spurring private investment in the economy.

Yet some would benefit more than others under the plan, and some would sacrifice more.

The GOP deal "would get to a balanced budget through disproportionately hitting programs that assist low-income people," said Isaac Shapiro of the Center on Budget and Policy Priorities, a research center.

That conclusion is based partly on the GOP plan's call to slash $190-billion over seven years from spending on domestic programs such as education, job training, environmental protection and grants to state and local governments.