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What Congress' legislation would mean to taxpayers

Here are answers to some basic questions about the $792-billion tax-cut package:

Q. What kinds of cuts are they?

A. The personal income tax rate would be cut by 1 percentage point in each of the five existing brackets. Married couples would get a $100-billion break with a doubling of the standard tax deduction for married couples filing jointly, now $7,200, and a broadening of the 15 percent tax bracket to include more married couples. Estate taxes would be eliminated and the capital gains tax would be trimmed from 20 percent to 18 percent for taxpayers with incomes greater than $25,750 and from 10 percent to 8 percent for taxpayers with incomes lower than that.

Q. Who is likely to benefit most?

A. While congressional negotiators adjusted the various tax proposals to give middle-income Americans bigger breaks than had been in the House legislation, the largest share of the cuts is likely to go to the nation's wealthiest citizens. That's only fair, some Republicans say, because they pay most of the taxes.

Q. Would anyone other than ordinary taxpayers benefit?

A. There are big reductions for businesses, including advantageous treatment of foreign income and trade-related tax breaks.

Q. Are these cuts likely to become law?

A. No. President Clinton has vowed to veto the cuts as irresponsibly large. But he might agree to smaller cuts in negotiations this fall with congressional Republican leaders. He has proposed a package of "targeted cuts" that would cost an estimated $250-billion over the next 10 years. Moderate Republicans and Democrats in the Senate have suggested a compromise $500-billion cut.

Q. Where is the money for these tax breaks coming from?

A. Good question. Right now, Congress is voting to trim revenues by hundreds of billions of dollars based on a guess by some government accountants about what might happen to federal tax revenues over the next 10 to 15 years. Clinton went so far as to predict that a surplus of $5.9-trillion will accumulate over the next 15 years. The Congressional Budget Office has predicted a 10-year surplus of $2.9-trillion. Most private experts say these predictions aren't worth the paper they are written on.

Q. Why can't the government tell how much money will be coming in?

A. The forecast depends on economic changes that are almost impossible to predict beyond a year or two. For instance, personal income tax revenues have jumped about 2 percent a year in recent years, adding more than $150-billion a year to government revenues. No one knows for sure why, and that jump could end tomorrow.

Q. Assuming the surplus predictions are accurate, are there still any reasons that cutting taxes now might be a bad idea?

A. Yes. About $2-trillion of the $3-trillion surplus is really money deducted from the paychecks of Americans to help finance Social Security. Both Republicans in Congress and the president agree that money should be set aside to protect Social Security. But with a wave of baby boomers expected to begin collecting Social Security payments beginning early in the next century, advocates of the senior retirement program say a share of any remaining surpluses should be set aside to buttress Social Security. The Medicare senior health program is facing a financial crunch too, and may need government aid.

Q. But won't bureaucrats just waste any surplus money that isn't returned in tax cuts on new spending?

A. No. To achieve the $1-trillion non-Social Security surplus, Congress and Clinton are assuming substantial further cuts in government spending over the next 10 years in basic programs like education, environmental protection, medical research and the national park system. With agreed-upon growth in Pentagon spending, these cuts could total more than $750-billion, Sen. Robert C. Byrd, D-W.Va., has estimated.

Q. Isn't it right to be aggressive in cutting waste from government programs?

A. Yes. But Congress isn't even making cuts agreed on for next year's federal budget. Instead it is calling the cost of the 2000 Census _ a counting made every decade for more than 200 years _ "emergency spending." Other emergencies include significant aid for beleaguered family farmers, funding for the Kosovo conflict and assistance for veterans. In fact, some experts believe next year's surplus may already have been eaten by various emergencies.

Q. What does Federal Reserve Board Chairman Alan Greenspan think of the big tax-cut proposals?

A. In recent congressional testimony, Greenspan said now is not the time for large tax cuts, which might be more appropriate when the economy is dipping and needs a boost. Greenspan suggested that any surpluses be used to pay down the national debt.

Q. If surpluses are so uncertain and Social Security and budget pressures so serious, why are the Republicans in Congress and the president even discussing generous tax cuts?

A. In a word, politics. Republicans believe they can gain advantage in next year's congressional and presidential campaigns even if Clinton vetoes their tax cuts. They would like to paint him and Vice President Al Gore as "tax and spend" Democrats. And the president is hardly without blame. He wants to spend more money on education, housing and research, and to pave the way for that he also has promised tax cuts.