Where the New Taxes Hit Home

By Bernard Baumohl

For the past four months, Bill Clinton's tax plan has been a moving target, making it difficult for taxpayers to calculate how it would affect them. But now is the moment for a quick snapshot -- or two. The new taxes people will pay lie somewhere between two versions: the House's and the Senate's, which will be reconciled in the joint conference committee. In many ways, the two plans are quite similar. Both seek to raise about $250 billion in new revenues. Most of the burden will fall on the wealthy.

In other ways, the plans diverge. Both versions increase the earned-income credit for the poor, but the House plan is more generous. The Senate plan is more congenial to the rich, phasing in its tax increases (from 31% to 39.6% for the top rate) over two years rather than hitting the wealthy with the full amount this year, as the House plan does. The most dramatic difference involves energy. The House plan's BTU tax would cost most families more than the Senate version's 4.3 cents increase in the gasoline tax. To see the impact each bill would have on different taxpayers next year, when fully phased in, Time asked the accounting firm Coopers & Lybrand to calculate the income-tax consequences, and the firm KPMG Peat Marwick to gauge the energy-tax fallout.

A RETIRED COUPLE WITH SOCIAL SECURITY INCOME

They take in $55,000 annually, of which $14,000 comes from Social Security. Under current law, only $5,500 of the benefits is subject to taxation. But the House wants $9,350 to be taxable, increasing their IRS bill $578. The Senate raises the tax bite only $158. Their energy-tax bill will go up $59 under the Senate plan and $141 in the House bill. Total impact: taxes up $217 (Senate) to $719 (House).

A POOR FAMILY WITH TWO CHILDREN

A single parent earning $16,000 would gain from a larger earned-income credit. Currently, this person would get a $734 refund, because the credit would be larger than the taxes owed. That would jump $636 under the House plan and $494 in the Senate's. The family's energy taxes would rise $89 in the House plan and $35 in the Senate. Total impact: taxes down $547 (House) to $459 (Senate).

A SINGLE, YOUNG, COMFORTABLE PROFESSIONAL &

Some groups will find no change whatsoever in their income-tax liability. Under current law, an individual earning a total of $44,000 will end up with a taxable income of $37,950 after using the personal exemption and standard deduction. At that level, the IRS will insist on receiving a check for $7,753. The outcome would be the same under both the House and Senate bills. However, this person's annual energy tax, currently $99, is scheduled to go up $58 under the Senate plan and $131 under the House bill.

A TWO-INCOME FAMILY, TWO KIDS

These taxpayers, who earn a total of $66,000, not only use their personal exemptions but also itemize deductions to shrink their taxable income. The result is the same under both the House and Senate bills. Their federal income taxes of $7,245 will be unchanged. Their energy-tax bill, currently $124 a year, will go up $73 under the Senate bill and $170 in the House plan.

A HIGH-INCOME COUPLE WITH THREE CHILDREN

This family earns $200,000, but exemptions and deductions cut their taxable income to $149,692. Their tax bill will go up for two reasons: higher marginal rates and bigger Medicare payroll taxes. Under the Senate plan, their income taxes jump $1,040; in the House bill, $1,282. Their energy tax: up $80 (Senate) to $208 (House).

A WEALTHY COUPLE WITH TWO CHILDREN

The well-to-do, including this family with $300,000 of income, won't like what their tax attorneys will say. Under current law, no personal exemptions are allowed at that income level, but a typical number of itemized deductions could bring their taxable income down to $255,757. At this point, the House version would increase their taxes $6,865. The Senate bill is notably more sympathetic, asking for $3,868. And don't forget the energy tax: up $82 (Senate) to $228 (House).