Al Gore is coasting to victory in the Battle of New York. He leads 51 percent to 35 percent, according to an October 1 Zogby survey (margin of error: plus or minus 3.7 percent.) Gore is so confident and Bush so resigned that their respective campaign commercials are rarer here than palm trees in Central Park.
New Yorkers love the vice president. But his tax plan suggests the feeling is not mutual. Gore would leave millions of New Yorkers with zero tax relief. And nearly all those who Gore would help would fare far better under Bush’s tax system.
E. J. McMahon Jr., a fiscal analyst and senior fellow with the Manhattan Institute, examined the two plans for a just-released study called Campaign 2000 Tax Proposals: What They Mean for New Yorkers. He discovered that in nearly every income category, marital situation and family circumstance, Gore offers Bacon Bits while Bush serves steak frites. This is not just true for “the wealthiest of the wealthy,” as Gore says ad infinitum about Bush’s measure, but for middle-class taxpayers as well.
All in all, if Gore’s policy were implemented today, it would save New Yorkers $3.5 billion annually, McMahon estimates. Bush’s blueprint would be worth at least $13.6 billion to Empire State taxpayers each year.
Gore’s fetish for “working families” led him to design a tax cut geared to low- to middle-income earners. That, of course, begs the question: middle compared to what? While a median-income family of four earns $47,100 in Little Rock, Arkansas, an equivalent family would make $56,100 in New York State, $56,200 in New York City and $83,100 in Westchester County, the current home of Hillary Rodham Clinton.
New Yorkers, as well as those in costlier, higher-income areas across America, make too much money to see much relief in Gore’s vision.
Atop his in-depth study, McMahon prepared additional figures on the impact of Bush’s proposed Personal Retirement Accounts (PRAs). Bush would free Americans to dedicate 2 percent of their 12.4 percent Social Security taxes into PRAs that they would own, control, and invest. They also could bequeath those funds to their heirs, something forbidden in today’s Social Security system. Of the $13.6 billion in annual tax savings New Yorkers would enjoy under Bush, $2.5 billion would be generated if just 50 percent of them opened PRAs.
Gore also assumes a 50 percent participation rate in his Retirement Savings Plus (RSP) program. It would provide matching funds from general revenues for modest- and middle-income taxpayers who could afford to invest money above and beyond their payroll taxes. For married couples filing jointly who earn up to $30,000 annually and singles who make $15,000, Gore promises a federal match of $3.00 for every $1.00 they invest, up to a total of $2,000-per-account annually.
Gore trumps Bush in only one of the scenarios that McMahon studied: a single taxpayer making $27,300 would receive $1,000 under Gore versus $846 under Bush. This assumes that the taxpayer also saves enough in a Gore RSP to earn the $1,000 maximum amount Gore would offer in matching funds.
A single person earning $39,700 would see $500 in matching funds from Gore, versus a combined income-tax rate cut and 2 percent payroll tax cut (deposit in a PRA) equal to $1,237. Singles who make over $50,000 get no tax break from Gore, since they are ineligible for RSP matching funds. Singles making $62,970 would get $0.00 from Gore and $2,439 from Bush. A single earner making $83,000 would see $0.00 under Gore and $3,447 from Bush.
And on it goes.
A “working family” in Buffalo with a mom, dad, and two kids earning $46,900 would see $2,532 in income-tax cuts and matching pension funds from Gore versus $2,819 in income and PRA tax cuts from Bush.
A similar Big Apple family of four earning $56,200 would see $2,309 from Gore and $3,061 under Bush. A Westchester family with $83,100 in income would save $1,406 under Gore and $4,544 under Bush.
McMahon has chilling news for taxpaying couples who itemize their tax deductions, usually to write off their apartment or home mortgage interest payments. “Because Gore’s plan provides no marriage-penalty relief for itemizers,” McMahon writes, “they receive hundreds of dollars less from Gore’s plan simply because they pay New York State’s high property and income taxes.” A median Westchester couple with two kids $83,100 in pay stubs would see just $1,000 in matching RSP funds from Gore versus $4,290 from Bush’s income and PRA tax cuts. A similar Gotham family with wages of $56,200 would see $2,000 under Gore and $3,061 from Bush.
“Factoring in the Bush Social Security tax cut makes his plan significantly better for all concerned among the people we highlighted in our study, except the lowest-income single,” McMahon says.
“Of course,” he adds, “the other big difference under the Bush plan is that your benefit, in the form of a freed-up portion of Social Security taxes you can now invest as you see fit, is not contingent on how much you save out of your own money. Your former Social Security tax is your own to invest, even if you can’t afford to save anything otherwise. More flexibility and freedom — concepts totally foreign to Gore’s approach.”
Perhaps most worrisome of all, Gore’s income litmus tests are not indexed. Consequently, those who Gore targets for tax relief today will become untargeted as their incomes rise with inflation. Amazingly, Gore remains comfortably ahead in New York and competitive across America while promising self-extinguishing tax cuts.
“If you’re poor and plan on staying poor,” McMahon tells me, “Gore is going to make sure you have good savings. Since the vast majority of people don’t plan to make $25,000 all of their lives, you’re quickly going to graduate out of the range where Gore helps you very much.”
Of course, the salary and tax-cut figures quoted here apply outside New York. Voters in high-income states such as California, Connecticut, Illinois, and New Jersey should meditate on these numbers. Perhaps Gov. Bush should ignore Gore’s and the media’s obsession with his tax cut’s impact on the top 1 percent of taxpayers. Bush should tout loudly his plan’s far more generous benefits for productive and reasonably successful citizens.
As Americans ponder the veep’s tax proposal, they ought to walk a mile in a New Yorker’s moccasins. If Albert Gore’s tax scheme can fail here, it can fail anywhere.