Who gains from tax-cut bill

There is a nice tax cut waiting for you - that is, if people refer to you as Dr. or "my lawyer," not Mr. or Ms. And possibly, you might notice the relief if you and your spouse make between $100,000 and $200,000 a year. But if you're laying bricks or working as a teller at the local bank, you might wonder what all the fuss is about.

President Bush is expected to sign into law a one-year, $31 billion cut for 2006, along with extending current tax cuts worth $39 billion over the next five years.

Some economists think the timing could be good: By the time much of the tax relief is distributed next April 15, the economy is likely to be slowing. But the cost of the cuts worries those concerned with the budget deficit. And yes, most of the immediate benefits will go to those with high incomes, even though the legislation is supposed to bring relief to middle-income taxpayers faced with the alternative minimum tax (AMT) - something originally designed to ensure that upper-income Americans paid Uncle Sam their share.

"It will only apply to a small share of all consumers, but it will have a positive impact on consumption," says Richard Curtin, director of consumer surveys at the University of Michigan in Ann Arbor. "It will be well timed since we expect the economy to slow down in the second half of this year and the first half of 2007."

The Tax Foundation, a nonpartisan research group in Washington, believes the current economic recovery coincides with the tax cuts that went into effect in 2003. Since then, some 5.3 million jobs have been created, the unemployment rate has fallen from 6.3 percent to 4.7 percent, household net worth is up $13 trillion, and the budget deficit has dropped $38 billion.

"The economy has definitely recovered starting with the tax cuts enacted in May of 2003," says Bill Ahern, a Tax Foundation spokesman. "That included income-tax cuts as well as dividend and capital gains cuts, and it's impossible to untangle the effects of those different tax cuts."

But even among economists, the subject of the economic impact of tax cuts is controversial. Democrats argue that after every recession, there is some kind of snapback - and this one was aided by the Federal Reserve reducing interest rates all the way down to 1 percent.

Max Sawicky of the liberal Economic Policy Institute (EPI) argues the economic recovery "is one of the weakest." After the tax increases of the 1990s, he says, the economy performed better. "The latest tax cuts will have no impact on the economy in 2007," he maintains.

There is no question, however, that some 15 million taxpayers will be spared the hassle of figuring out a federal tax liability under the AMT. The legislation will increase the exemption for filing from $58,000 for a married couple filing jointly to $62,550.

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