How do you spell tax relief?

Taxes can befuddle even the seasoned number-crunchers in Washington. Add a hefty dose of politicians' "spin," and it can be next to impossible to discern how President Bush's tax cuts actually affect Americans.

The $1.6 trillion plan won't pass Congress intact, of course. But it's a starting point for a discussion that will likely center on issues of fairness and affordability.

Backers say an across-the-board cut is in order, given that the government is running a large surplus while many Americans are deep in debt. Critics say the plan fundamentally shifts the tax burden by virtually ignoring 12.2 million lower-income families - with 24 million children.

Mr. Bush would exchange five income-tax brackets for four lower ones with rates of 10, 15, 25, and 33 percent. It would also end the estate tax and raise the tax credit per child to $1,000.

This analysis is intended to help readers sort out the implications of the tax plan.

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Tax-code fairness is a perennial topic for debate. Tax brackets and rates have changed over the years, but America has generally opted for an income tax in which the rich pay a bigger share of their earnings, on the grounds that they can better afford it. Meanwhile, about 20 percent of wage earners at the bottom of the economic ladder pay no federal income taxes at all.

In the current debate, Democrats charge that the lion's share of the tax cuts will go to those who need it least: the very rich.

Republicans shoot back with a fairness argument of their own: The rich pay the most taxes, so they should be first in line for a sizable cut. They note, too, that those making $200,000 a year and up would end up paying about 41 percent of all income taxes, up from 39.1 percent today.

But the income tax isn't the whole picture. In the case of the Bush plan, looking at that tax alone ignores other big tax savings for the rich, primarily the proposed elimination of the estate tax.

That's where the table above comes in. It combines the impact of all federal levies - from those on gasoline and cigarettes to capital gains - to give an "effective tax rate" for various income groups.

By this measure, the very rich stand to get the largest tax cuts not only in dollar terms, but also in percentage terms. Under Bush's plan, over five years their effective rate would fall from 37.1 percent of earnings to 32 percent. They would save on average $46,000 a year.

Those earning less than $13,600 would see the smallest cut in their overall federal taxes. One key reason: Taken as a group, they pay no income taxes. But, like all workers, taxes for Social Security and Medicare are deducted from their paychecks, and these are not changed under the White House plan.

Supporters of the Bush plan note that Congress raised taxes on the wealthy in 1993 in an effort to tame the federal deficit. Now that the budget shows a surplus, they say, it's time to drop the top rate back down.

But critics note that the upper income brackets have enjoyed the biggest income surge in the boom of the 1990s, while those of modest means have seen wages stagnate.

(c) Copyright 2001. The Christian Science Publishing Society