The first measure is the Child Tax Credit. For 1998 returns, parents can claim $400 per child under the age of 17. Next year, that number will be $500 per child. The credit applies to single filers with adjusted gross incomes less than $75,000 and joint filers with incomes less than $110,000.
Another important change is the threshold for exemption from the estate, or Death, taxes. The current exemption is up to $625,000. At this time next year, that exemption will have increased to $650,00. By 2006, without a change in the law, the exemption will be $1,000,000.Small business owners will have two important changes to their deductions. The first is a deduction in health insurance premiums. This year, small businesses can deduct $45% of the premiums. Next year, for tax year 1999, that deduction will be 60% of the cost. Within four years, the deduction is expected to be 100%.
Come next year, small businesses will also be able to deduct up to $19,000 in expenses for tangible personal property that is purchased for use in the conduct of a trade or business. The deduction is up from the $18,500 that can be claimed on 1998's tax year. By 2003, the deduction will increase to $25,000 in 2003 and thereafter. Other changes taking effect this year are those regarding dealings with the IRS. Prior to January 19 of this year, the IRS was able to seize a "principle residence" without due process and judicial approval. Now, that practice is forbidden. In addition, taxpayers will be able to recover the "reasonable" costs they incur -- such as attorney fees -- when the IRS takes a position against a taxpayer that is not "substantially justified."
For the 1999 tax year, senior citizens should be aware of an increase in earning limits. Americans between the ages of 65 and 69 will be able to earn up to $15,500 without losing Social Security benefits, up $1,000 from the 1998 tax year. That limit is expected to increase to $30,000 in 2002. While there are some minor tax cuts, there are also some increases, most notably in Social Security, which many Americans will have felt in their first paycheck of 1999. Last year. the payroll tax was 12.4 percent levied on the first $68,400 of income. Beginning Jan. 1, that amount is levied on the first $72,600 of earnings. This raises taxes by $490 for approximately 9 million taxpayers.
In almost every case of "tax cuts," the reductions are minimal. Americans are still burdened by too many taxes and regulations (which are merely hidden taxes). While initiatives that allow even a few people to save even a few dollars should not be scoffed at, Congress needs to get serious about making deep, across-the-board tax cuts.
Americans should not be content with letting Congress make only small tax cuts targeted to small groups. If there is to be more than rhetorical lip-service paid to the phrase "doing the business of the people," then Congress should act immediately to scrap the Internal Revenue Service, scrap the current tax code, and replace it with something much simpler.
And with rates much, much lower.