Word: brackets
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Dates: during 1980-1989
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Before Reaganomics, the phrase "tax deductible" struck a chord in the hearts (and wallets) of upper-income-bracket Americans. It encouraged them to depart with sizable--and non-taxable--chunks of their assets (and thereby do their part to benefit humanity) since the only other option was to donate many of their taxable dollars to Uncle Sam. Things are different now. The new tax laws make it less attractive for wealthy (and some not-so-wealthy) people to give their money away. They might as well hold onto it, since the federal government isn't taking so much in taxes...
...rather than aid fundraising, as the Reagan administration claims it will. By cutting maximum personal income tax rates from 70 per cent to 50 per cent, for example, the administration raises the net "cost" of donating money to Harvard. Under the old law, a person in the highest tax bracket keeps only 30 cents out of every dollar earned, so if he gives a dollar to Harvard--a non-taxable gift--it costs him only 30 cents. With the tax cut, the same person will keep 50 cents for every dollar earned, thus the cost of giving a dollar...
...A.S.C. is most beneficial to middle-and upper-middle income people. Investors must be in a relatively high tax bracket, about 30%, for the tax saving to compensate for a return that is lower than from a money-market fund. For instance, a family with an income of $50,000 a year and normal deductions would have to receive a taxable return of about 20% to equal the tax-free yield of 12.61%. For people making less money, however, the A.S.C. is not as attractive. For a family earning $19,000 annually, that same 12.61% would be equivalent...
...counterattacking. One entry: Cadillac's Cimarron, whose hefty price of $12,000 and up has not discouraged sales thus far, and should not if General Motors' calculations prove correct. The company has found that during the 1980s, the number of people in the 35-to-44 age bracket earning more than $35,000 should grow by 129%. As in many other businesses, Detroit knows that those baby-boom consumers will be fueling its sales for years to come. -By John S. DeMott...
Indexing. Slipped into the package during the last few days of debate, this would guard against "bracket creep" by indexing taxes to changes in the Consumer Price Index. For example, a person earning $20,000 who received a 10% raise at a time of 10% inflation would pay no extra tax. It would not become effective until 1985, when the 25% cut will have run its course...