Word: brackets
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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...
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...
...reduction of the maximum individual tax rate from 70 per cent to 50 per cent. A person in the highest tax bracket now keeps only 30 cents out of every dollar he earns, so if he gives a dollar to Harvard--a non-taxable contribution--he "loses" only that 30 cents...
...Senate voted to tie tax brackets to the rate of inflation, beginning in 1985. Reagan opposed including that in this bill mainly because of the loss to the Treasury: some $12.6 billion in 1985. The Senate aim is to avoid bracket creep, in which inflation edges taxpayers into a higher tax rate though they do not gain in buying power. Both chambers seem to agree that the estate tax should be nearly wiped out. They would raise the value of estates that can be passed to an heir tax-free from $175,625 to $600,000. Only...