|Lower tax rates for all, rebate checks for some
|By Kay Bell
President Bush called it "itty bitty." Democrats
derided it as a gimmicky giveaway to the wealthy. And pollsters
said most Americans put tax-cut legislation low on their wanted
But just before the Memorial Day weekend, the country's
third largest tax-cut in history was passed. And it's a safe bet
that, despite the polls, nobody's going to refuse the extra dollars
the legislation will provide most taxpayers.
So just what do the tax changes
mean to you?
Enjoy the breaks while you can. Most are, at least
officially, slated to end within a few years. Congress is increasingly
using such short-term legislative moves so that when it looks at
the federal balance sheet, tax cuts don't produce more red ink.
Of course, Congress could always make more changes
down the road. Until then, these are the details on the latest tax-law
Income tax brackets are now lower than ever. The reductions
are retroactive to the beginning of the year and mean that many
workers should soon be getting slightly larger paychecks.
The 10 percent and 15 percent rates remain, but the
four higher brackets are cut:
The income ranges covered by the 10 percent and 15
percent categories also will increase slightly -- up to $7,000 for
single taxpayers, $14,000 for joint filers. This means that more
of your income will be taxed at lower rates.
When lawmakers last tinkered with the tax brackets,
they decided to get tax money into individuals' hands via "rebate
checks." This time, Congress is leaving it to employers. Businesses
will soon get new tax withholding tables and make adjustments in
workers' paychecks to reflect the new rates. July 1 is the target
date for the new tables.
What about payroll withholding already collected at
the now-too-high rates? In most cases, it means you gave Uncle Sam
a bit too much for the first half of the year. This could produce
a bit bigger refund (or smaller tax bill if you expect to owe) when
you file your 2003 return.
Some taxpayers who have dependent children, however, will be
getting a $400 government check this summer.
Previously, eligible parents could reduce their taxes
by $600 per youngster. The credit amount was set to gradually increase
until it reached $1,000 in 2010. The new law speeds up the timetable
for the increase. The $1,000 credit is now effective for 2003 taxes.
Rather than making parents wait for the money, the
Treasury Department will send $400 checks to filers who claimed
the child tax credit on 2002 returns. This was the method Uncle
Sam used two years ago when it issued "rebate checks"
to reflect the newly created (and retroactive) 10 percent income