How Tax Plans Play in Peoria

Americans, tuning out the political infighting, just want to know how much money is coming

As Congress and the White House prepare to battle over the most significant tax cut in 16 years, most Americans from California to Colorado, Vermont to Florida are responding with a yawn and a nod of skepticism.

The booming economy - not the prospect of extra money back from next year's Form 1040 - is the predominant money matter on US citizens' minds. Most seem more interested in the fireworks this holiday weekend than the sound of politicians bickering about capital gains and tax-deferred education accounts.

"They vaguely hear the House bill is different from the Senate bill, but in general it's just background noise," says Mervin Field, a veteran California pollster.

Voters are also skeptical of the politicians' promises. While pundits say that is often well-grounded, this year most Americans will likely get some sort of real tax relief after the final vote is cast.

The still unresolved debate: Who will get how much? Among the crucial details still to be settled are whether children of low-income parents who don't pay taxes will be able to qualify as a $500 tax credit on their parents' return, and how deep a capital-gains cut the president will accept.

The tax cuts are a key element of the larger budget agreement that was struck between the White House and congressional Republicans last month.

Polls find that Americans are also overwhelmingly skeptical about this fiscal deal's eventual effects. A survey by Peter Hart Associates, a Democratic polling firm in Washington, found that only 14 percent of citizens believe the budget pact will produce the promised deficit reduction and tax relief within the allotted five years. So when it comes to today's Washington tax wrangling, "it's not like people are sitting on the edge of their seats wondering 'will this bill pass?' because they really don't believe they'll get a tax cut out of it," says Hart pollster Guy Molyneux.

Retired math and physics teacher David Kaufman doesn't put much stock in Washington talk of tax reduction. In fact, he's paid little attention to it at all. "It's like they're trying to untie the Gordian knot; they'll never succeed," says the native New Yorker.

Others simply seldom believe politicians and their promises.

"I think it's going to be more smoke and mirrors, and we're all going to have to pay for it down the line anyway," says Peter Audet, a corporate communications manager in Florida.

'N.Y.P.D. Blue' this isn't

Still, the battle lines in Washington are drawn, and special interests are already weighing in. Pollsters like Floyd Ciruli in Denver say the public will eventually get engaged in the debate, too. "It took a long time for the differences in the health-care initiatives to finally get down to the public. But at a certain point people will start to pick up on what's at stake here," says Mr. Ciruli.

All sides agree on a broad framework: There should be a $500-per-child tax credit, a credit for the expense of college tuition, a capital-gains tax cut of some sort, a cut in the inheritance tax, and expanded opportunities for wealthier Americans now excluded from opening Individual Retirement Accounts.

But the devil, as always, is in the details. The White House accuses House Republicans of tilting their tax cuts to the rich. For instance, the Republicans want to limit the child tax credit only to people who pay taxes. Because several million families with incomes between $15,000 and $30,000 receive what's called an Earned Income Tax credit, they wouldn't qualify.

As a result, says Iris Lav of the Center on Budget and Policy Priorities in Washington, 40 percent of children would be ineligible to receive the child tax credit because their families make too little money. On the other hand, only about 3 percent would be ineligible because their parents make too much.

The president would target his child tax credit. It would cover kids under 17 through 2002 and 19 thereafter, and would be phased out for upper-income families.

Republicans counter that tax cuts should be for people who pay taxes; anything else amounts to welfare. They argue the president's proposal is too broad and wouldn't give enough tax cuts to people with the resources needed to stimulate investment and increase savings.

To do that well, Republicans like Mark Bloomfield of the American Council for Capital Formation say the capital-gains tax should be cut across the board from 28 percent to 20 percent. The president, however, balks at that approach. His updated tax plan would simply allow investors to exclude the first 30 percent of profits from investments held more than one year.

Try these ideas on for size

Nor are the professional politicians the only people in the US with tax-cut ideas. Indeed, while few people interviewed had much interest in what was going on in Washington, everyone had clear ideas about what kind of tax cut they'd like to see.

Milo Pinckney, a Long Island entrepreneur, thinks about the capital gains tax "all the time" and says it definitely should be cut. But he believes it should be targeted at people who invest in companies that create jobs, particularly in poor neighborhoods.

New York musician Brian McCormick is all in favor of the child tax credit and the tuition credit. "Of course I am; I have a daughter. I think anyone with children would be," says Mr. McCormick.

Amy Johnston, a construction manager in Vermont, also wants a capital-gains tax cut targeted at small entrepreneurs who take risks to create businesses. "But if they don't target it and people are leaving the stock market with wheelbarrows of money and not paying tax on it, those revenues have to be made up, and you know where it's going to come from," says Ms. Johnston.