How U.S. Income Tax Cuts Are Really Tax Increases - Bloomberg's Wasik

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http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_wasik&sid=aUfkWACqky5c

How U.S. Income Tax Cuts Are Really Tax Increases: John Wasik
Oct. 4 (Bloomberg) -- While purring about middle-class tax breaks, U.S. lawmakers who backed them ignored how the cuts would further accelerate state and local tax increases.

The $146 billion ``Working Families Tax Relief Act of 2004'' -- passed by Congress on Sept. 23 -- will actually increase the total tax burden for most households.

The tax savings will hold up like papier-mache when you consider how other taxes shred the federal breaks. The alternative minimum tax as well as state and local levies will continue to balloon as the new law vacuums money from the coffers of local schools, agencies and state governments.

``The decline in federal revenue sharing causes a greater burden on middle-class homeowners,'' said Richard Roll, head of the American Homeowners Association, a national consumer membership organization. ``The federal tax cuts have a concealed effect. It's a detriment.''
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While Congress has passed legislation to bolster national security and education (``No Child Left Behind Act'') and to fund Iraq and Afghanistan reconstruction, it has shortchanged state and local governments with ``unfunded mandates,'' which are laws passed by Congress without adequate funding given to states to implement them.

The federal government's spending binge and tax-cut shortfalls shifted some $33 billion in bills to deficit-ridden state and local agencies in fiscal year 2005. These expenses are passed on to you through higher sales, excise, small-business and property taxes, according to the National Conference of State Legislatures, an association that represents state lawmakers. As a result, state taxes alone rose by $18 billion from 2000 to 2003.

Combining the effects of record home appreciation with federal-revenue shortfalls, local tax authorities have increased property-tax bills as much as 56 percent during the last four years in some areas. <snip>

The easing of the marriage penalty in the current tax law, which lowers effective tax rates for dual-income married couples, also can be a wash. The alternative tax affects middle-class married couples with children the most.

``Virtually all (94 percent) of married couples with two or more children and adjusted gross income between $75,000 and $100,000 will be on the AMT by 2010,'' the center's update on the AMT stated recently. <snip>