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Despite Pledge, Taxes Increase for Teenagers

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  • Ram Lau
    http://www.nytimes.com/2006/05/21/washington/21tax.htm Despite Pledge, Taxes Increase for Teenagers By DAVID CAY JOHNSTON The $69 billion tax cut bill that
    Message 1 of 1 , May 21 11:04 AM
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      http://www.nytimes.com/2006/05/21/washington/21tax.htm
      Despite Pledge, Taxes Increase for Teenagers
      By DAVID CAY JOHNSTON

      The $69 billion tax cut bill that President Bush signed this week
      tripled tax rates for teenagers with college savings funds, despite
      Mr. Bush's 1999 pledge to veto any tax increase.

      Under the new law, teenagers age 14 to 17 with investment income will
      now be taxed at the same rate as their parents, not at their own
      rates. Long-term capital gains and dividends that had been taxed at 5
      percent will now be taxed at 15 percent. Interest that had been taxed
      at 10 percent will now be taxed at as much as 35 percent.

      The increases, which are retroactive to the first day of the year, are
      expected to generate nearly $2.2 billion over 10 years, according to
      the Congressional Joint Committee on Taxation, which issues the
      official estimates.

      Over all, the tax bill that Mr. Bush signed Wednesday reduces taxes by
      $69 billion.

      Mr. Bush pledged in 1999 to veto any bill that raised taxes. In
      response to a question about the tax increase on teenagers in the new
      legislation, the White House issued a statement Friday that made no
      reference to the tax increase, but recounted the tax cuts the
      administration has sponsored and stated that President Bush had
      "reduced taxes on all people who pay income taxes."

      Challenged on that point, the White House modified its statement 21
      minutes later to say that Mr. Bush had "reduced taxes on virtually all
      people who pay income taxes."

      The deputy White House press secretary, Kenneth A. Lisaius, declined
      to discuss the reasons Mr. Bush broke his pledge or anything else
      beyond the modified statement, which emphasized the $880 billion in
      tax reductions from tax laws Mr. Bush signed in 2001 and 2003.

      Americans for Tax Reform, an influential lobbying group that seeks to
      reduce taxes, had led the drive to press politicians to pledge no new
      taxes. The pledge has been signed by 256 members of the House and the
      Senate, nearly all of them Republicans, and by thousands of candidates
      for state and local office.

      The pledge commits signers to "oppose any and all efforts to increase
      the marginal tax rates for individuals and businesses." Mr. Bush went
      beyond the pledge when he was seeking the Republican nomination for
      president.

      "If elected president, I will oppose and veto any increase in
      individual or corporate marginal income tax rates or individual or
      corporate income tax hikes," he wrote in June 1999 to Grover Norquist,
      president of the Americans for Tax Reform.

      Mr. Norquist, in an interview Thursday, said he was unaware that the
      bill raised taxes and tax rates on teenagers with college savings
      funds because "no one here noticed" the provisions. But Mr. Norquist
      called the bill raising taxes on teenagers with investment income "a
      technical violation of the pledge" and noted that his group opposes
      all retroactive tax increases. He pledged to immediately begin a
      campaign to have the tax increases rescinded.
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