Four senior Democrats on Monday proposed a major shift in federal tax policy that would cut the burden on 134 million people and raise taxes on the richest 15 million Americans.
In addition to reversing what they view as unfair tax changes in the 1980s, the lawmakers said their plan "provides the most effective way to accelerate the economy's recovery from recession."Two of the sponsors, Sen. Albert Gore Jr., D-Tenn., and Rep. Tom Downey, D-N.Y., predict the proposal will pass this year.
The bill renews the long battle that Democrats and Republicans fought last year over who could make the tax system fairer.
Some key leaders in Congress hope there will be no major tax legislation this year, fearing that if Democrats push their proposals, President Bush will try again to win a tax cut on investment income.
The new bill, whose sponsors include Reps. David Obey, D-Wis., and George Miller, D-Calif., would:
-Aid families with children by replacing the personal exemption with a tax credit of $800 for each child under 18. The exemption, expected to be $2,300 per person next year, results in a tax saving of $345 for a lower-income family in the 15 percent tax bracket but saves $713 for a top-income earner, who is in the 31 percent bracket.
-Expand the earned-income credit, which goes only to lower-income working families with children.
-Replace the present three brackets - 15 percent, 28 percent and 31 percent - with a four-bracket system of 15 percent, 28 percent, 32 percent and 35 percent. The highest rate would hit those whose adjusted gross income is in the $130,000-to-$140,000 range.
-Eliminate special tax increases enacted on higher-income people last year. They would be allowed once again to fully deduct state and local taxes and charitable contributions and to claim full personal exemptions.