CNN LIVE EVENT/SPECIAL
Aired May 24, 2003 - 16:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: Welcome to "Dollar Signs." We'll spend a good portion of the next half hour talking about money that will be coming your way, courtesy of the tax cut. It may increase your size of your paycheck as well, and if you're a parent, you may also receive a refund. And if you're an investor, you may keep more of your earnings. We'll discuss how the tax cut impacts you. Plus, as the Memorial Day weekend kicks off the vacation season, we'll look at some travel bargains for you this summer. That's coming up later on.
Well, you may be saying "show me the money" now that there's a tax cut coming your way. We'll gladly comply. First, a look at how President Bush hopes the tax cut package will boost the economy. Let's turn to CNN's Chris Burns, who is at the western White House, the president's ranch in Crawford, Texas -- Chris.
CHRIS BURNS, CNN WHITE HOUSE CORRESPONDENT: Well, hi, Fredricka. The president having a little down time today with family and friends, and perhaps a little bit of time to bask in his legislative victory on Capitol Hill on that tax cut. But it's just one battle in the war on unemployment.
BURNS (voice-over): It barely squeaked through Congress.
DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: The Senate will come to order, please.
BURNS: Vice President Dick Cheney had to break the tie in the Senate. But President Bush nevertheless sees the tax cut as a victory, for himself and for millions of Americans.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This achievement is a victory for every family struggling to pay the bills, every entrepreneur hoping to expand a business and create new jobs, and every American looking for work. I look forward to signing this jobs and growth legislation in the coming week.
BURNS: The debate on Capitol Hill was especially bitter.
SEN. BILL FRIST (R-TN), MAJORITY LEADER: It creates jobs, it grows the economy.
SEN. TOM DASCHLE (D-SD), MINORITY LEADER: The gimmickery in this bill has enough sleight of hand budget tricks to make an Enron accountant blush.
BURNS: But the Republicans prevailed with an argument that $330 billion in accelerated tax cuts will be a shot in the arm for an economy with 6 percent unemployment. Joblessness is an issue the Democrats are hammering away at, especially now that President Bush has officially filed papers for reelection.
SEN. JOHN EDWARDS (D), NORTH CAROLINA: This administration, President Bush's administration has killed over two million jobs. They're going from factory to factory and store to store, trying to find work. Whether it's at a textile mill or a dry cleaners or a McDonald's.
BURNS: A new CNN/"Time" poll indicates Americans are divided as to whether the tax bill will fight unemployment, and 72 percent would rather see the money spent on health care.
The poll says President Bush's approval rating is 63 percent, down from the 70s during the war in Iraq. Most would vote for Mr. Bush next year, but much of that support is soft, with 18 percent saying they're only somewhat likely to check his name.
BURNS: As much as the polls can be an electoral pulse check, President Bush's victories in Iraq and on Capitol Hill with the tax bill don't appear to be an insurance of reelection. And it's a political eternity away from now to election day, it's about a year and a half away -- Fredricka.
WHITFIELD: All right, Chris, thank you very much.
Well, the tax cuts affect just about anyone who pays taxes. The big winners, married couples, especially those with kids. Here's a look at some of the key changes. The bill eliminates the so-called marriage penalty, increases the child tax credit to $1,000 per child, expands the 15 percent tax bracket, and reduces taxes paid on stock dividends to 15 percent. Let's bring in two guests in our discussion now.
Jack Otter is a senior editor of "Smart Money" magazine. And Donna LeValley is an associate editor of the J.K. Lasser newsletter. Donna, let me begin with you, ladies first, from New York. All right, who does this benefit the most? Is everyone going to be experiencing a fatter paycheck as a result?
DONNA LEVALLEY, J.K. LASSER: In July, everybody should realize more money. Because the tax rates will go down, so withholdings will be adjusted to reflect that. But especially married couples that file jointly and have children. They will receive a check, hopefully sometime in late July, and their standard deduction is now going to increase by $1,550. So in addition to expanding the 15 percent tax bracket, they're going to see the most savings.
WHITFIELD: So, Jack, are you saying that this is a winner for just about everyone? JACK OTTER, "SMARTMONEY" MAGAZINE: Oh, absolutely. I should point out that that child credit does phase out over $110,000, and by about $150,000, for a couple filing jointly, you won't get that credit. You, of course, still get a deduction for your child.
But yes, if the plan works as advertised, not only will we all get nice deductions and a little more in our paychecks, but the economy will improve.
WHITFIELD: Well, Jack, do you see that those -- those who already have a family started, you know, are already seeing that there's some incentive. But what about those who are just starting out?
OTTER: Well, because, obviously, you wouldn't have the child and so you wouldn't get that credit, you wouldn't see a benefit from the reduction in the marriage penalty. You don't get hurt by that either, but you wouldn't see that benefit. So you get a little less. I think you guys might have some numbers up there for exactly how much each person gets, depending on what your income level is. I think if you're, in, say, $40,000 range, you're only going to see about $300 reduction in your taxes this year. If you're making a lot more money, obviously you're paying more taxes and you're going to see a much bigger reduction.
WHITFIELD: All right. Parents are obviously getting a bit of a break. How about for investors, Jack?
OTTER: Well, there are two things there. You mentioned the break in the dividend taxes. And that's a big deal for investors who are in the highest tax bracket. You were paying the same rate on dividends that you used to pay on your ordinary income. So that could be up to 38 percent. Well, now, it's a flat rate of 15 percent.
Now, if you're already only in the 15 percent bracket, then that's what you're paying. But your dividend taxes have just been cut by more than half. But also, and this hasn't gotten as much attention, capital gains rate was cut by 25 percent, from 20 percent down to 15 percent. And so again, that's a big deal for investors who have capital gains. These days, unfortunately, more people have capital losses than capital gains. But over time, that will be a valuable deduction.
WHITFIELD: All right, Jack, hold on a minute. We're going to talk am little more about that, those dividends, those breaks, and as well, for you, Donna, just stick around a moment. We're going to pick up our conversation in a moment, right after this break. We're going to be taking it to the street when we come right back. We'll hear what Americans are saying about the tax cut in the latest polls, and we'll hear from some families who are expecting a check or two. Hear about what they feel about it. Is it enough? And of course, we'll be taking your questions. Time is running out. Send them in to email@example.com. We'll be right back.
(COMMERCIAL BREAK) WHITFIELD: Welcome back. A new CNN/"Time" poll shows Americans have mixed opinions about the tax cut. Forty-five percent say they're in favor of the plan, while 39 percent oppose it. Sixteen percent aren't so sure if it's a good thing or not. A majority of those surveyed, 57 percent, believe the tax cut would benefit the rich more than the middle class. About a third disagree with that notion. And less than a third think the plan will put a lot of money in their pockets; 62 percent say it won't.
Parents will likely be among the first to notice some money in their pockets. A change in the child tax credit means a check in the mail this summer for many of those families. But will that help the economy? CNN congressional correspondent Kate Snow reports now.
UNIDENTIFIED MALE: Anything else?
KATE SNOW, CNN CORRESPONDENT (voice-over): Four-year-old Tori Steinlicht doesn't know anything about money, but her parents do.
SANDRA STEINLICHT, MOTHER: It comes in the door, out the door. As soon as it hits.
SNOW: Sandra and Nick both work full-time and even then they have to borrow a little from relatives to make ends meet.
STEINLICHT: Time for lunch.
SNOW: Tori (ph) spends her day at Minnieland Day Care with a lot of other kids whose parents work.
Back in 2001, President Bush's first tax cut gave parents a slight break, increasing the child tax credit from $500 to $600. The credit would have gone up to $1,000 by 2010, but the new tax cut would do it faster, let parents claim the full $1,000 credit right away, an extra $400 this year.
The government would churn out checks this summer, $400 per child, to more than 20 million families.
Minnieland's director says the extra money would help her families a lot.
KAREN ATKINSON, MINNIELAND DIRECTOR: Any bit of help, you know, is welcome, very welcome. Many of them are hanging in there, making their weekly pages and they're actually crying out for help. I'll get grandparents that will send us a check one week, or aunt and uncle helping here, there.
SNOW: The Steinlichts say they've used the child tax credit money to pay off debt.
NICK STEINLICHT, FATHER: It's another $400 and that helps. You know, it's just going to go towards bills. SNOW: Economists say most families would do the same; rather than spend the money, they'd save it or pay bills. Would that jumpstart the economy? Probably not.
WILLIAM BEACH, SENIOR ECONOMIST, HERITAGE FOUNDATION: It goes to families that are not going to go out and use that money, we believe, to buy investments or to do the kinds of things that really create jobs.
SNOW: But Beach says the child tax credit would help long-term economic growth. As people pay off consumer debt, banks have more money to loan to businesses and that means more jobs down the line.
(on camera): As the tax bill is written, the child tax credit increase actually goes away after two years. Republicans say don't worry, a future Congress will extend those benefits. Democrats say it's a gimmick and part of the reason they say a tax bill is too costly, taking away from other priorities.
Kate Snow, CNN, Capitol Hill.
WHITFIELD: Let's bring back our guests, Jack Otter, senior editor of "Smart Money" magazine and Donna LeValley, an associate editor J.K. Lasser newsletter. And both are in New York. Donna, let me bring you in quickly and introduce you to the first e-mail question that we've got, because we're receiving lots of e-mail. "I'm single and my company laid off my entire department last October. I haven't been able to find work since, and I'm not fortunate enough to have a bunch of stock dividends coming my way. I know there are millions of others like me, what's this plan do for us?" Meaning this new tax cut package?
LEVALLEY: Well, I think you're going to be helped by the long- term. Hopefully, this tax bill will spur job growth, growth in the economy and you'll be able to find a new job and get back into the game. And when you get your first paycheck, hopefully it will be more than the last paycheck that you had. Unfortunately, this really is geared more towards people who have been suffering under the marriage penalty, who do have a child, won't receive this check. Otherwise, it's just a lowering of the rates for most people, and that will just improve the situation, I think, overall in the long-term.
WHITFIELD: Long-term, but nothing immediate for her. And that -- or for him, rather. That was Mitch from Portland.
Jack, let me introduce you to this other e-mail that we've got, and we have got a whole lot coming in. This one says: "As a waitress, my daughter earns $2.40 an hour plus tips; however, her tips are federally taxed. Often her paycheck is zero, because her salary is taken by her employer to pay these taxes. Will the president's new tax plan help my over worked and underpaid daughter?" That from Barb.
OTTER: Well, I'd have to know more about it, but it sounds like Barb needs an attorney. I mean, there's absolutely no reason the woman's paycheck should be anything close to zero. That sounds like a very odd situation. But that said, absolutely, this plan does lower tax rates for everyone across the board, so she'll get to keep a little bit more of it. But that sounds like a special situation. She really needs to find out what's going on there, because at a maximum, it sounds like a woman in that position should be paying maybe 20 percent federal taxes.
WHITFIELD: Maybe another way she might be asking that question, or a lot of folks might be asking that question for her would be, does this tax cut really benefit those who are not considered middle class or even upper class?
OTTER: Well, it does. But it is, as the critics say, going to put a lot more money in the pockets of wealthier people. Now, the defenders say, well, they're making more money, they're paying more taxes, so naturally it's going to go to them. But then, the counter to that is, well, this woman who is a waitress is probably going to pump that money right back into the economy, she is going to spend it somehow, even if it's paying bills, whereas someone quite wealthy, I think, at half a million dollars, your taxes are going to go down this year by about $13,000, you might just use that money -- you might buy bounds bonds with that money, the very bonds the government is issuing to pay for this tax cut, because of course we do have to borrow money to cover it.
WHITFIELD: All right. Jack and Donna, don't go away, because we've got more questions for you, and we're taking in more questions from many of you out there. Just keep those questions coming. Send them to firstname.lastname@example.org. We'll answer them when we come right back.
And if you're looking for some great vacation ideas on a tight budget, however, we'll have the ticket for you. This summer's best deals in a few minutes.
WHITFIELD: Welcome back to "Dollar Signs." We're talking about the impact of the tax cuts on your wallet, and we're having this discussion with our guests, Jack Otter, senior editor of "Smart Money" magazine and Donna LeValley, an associate editor of the J.K. Lasser newsletter. Both are in New York.
All right. I have got yet another e-mail for you guys. This one comes from Brian, who says: "How much more I will have to pay down the road for this tax cut? What will happen 10, 15 or 20 years from now when we have a $15 to $20 trillion debt?"
OTTER: That's an excellent question. I'm sorry, go ahead, Donna.
LEVALLEY: Well, hopefully, there won't be that much of a deficit. Typically if we can grow the economy, that will sort of shrink relative to how big the economy is, and there won't be a huge debt hanging over.
OTTER: Well, I mean, that is certainly the optimistic view, and let's hope that that's true, we'll grow our way right out of this deficit and everything will be OK.
On the other hand, as I mentioned before, we are literally borrowing this money for this tax cut, and the deficit ceiling was just raised to $7.3 trillion. That's a whole lot of money that the American government has borrowed, and we are all paying interest on that. So it is possible that not only could we pay down the road in taxes to cover those debts, but also that interest rates would go up, because that often happens as the debt rises, and in that case, then, of course, mortgages will be more expensive, too. So there is a significant potential downside to this tax cut.
WHITFIELD: So you see that this -- these cuts just might help make the administration look good for the short-term, but everyone else might be eating it much later?
OTTER: That's very possible. We have yet to see an economist disagree completely on that subject, so I won't take sides, though I will say that most economists believe that in the short-term, right now, a little bit of stimulus is a very good thing. The danger is longer term, if we bake in these tax cuts forever, then we could be in trouble.
WHITFIELD: All right, Jack, I'll let you have the first stab at our next e-mail, and this says: "How about the single person in the United States of America? Do they get any kind of tax cut? Seems like everybody must be married, with kids. What about the single people?" And that's from J. Gray Smith.
OTTER: Well, that's a good point. The emphasis in this tax cut is certainly on married people with children. Now, the single person gets a couple of benefits, though. First of all, all tax rates across the board, from the very highest, 38.6, I think, right down to the 10 percent bracket, all those tax rates are being reduced. So right there, the single person does get something. Also, one of the changes that helps out a family, I should say just sort of brings parity. Now, a married couple, each individual in the couple will get the same deduction that a single person gets, which was not true before. So that's just parity.
But also, the reduction in the dividend and the capital gains tax. That obviously applies to any investor. And so that's just as good for the single guy as it is for the married couple.
WHITFIELD: And Donna, how do you see it? Do you think that the single folks are getting the short end of the stick here?
LEVALLEY: Well, like he said, doing away with the marriage penalty is just giving married people parity to single people. One of the things he didn't mention was that the 10 percent bracket will be expanded. So instead of the first $6,000 being taxed at 10 percent, the first $7,000 will be taxed at 10 percent. So that's one of the benefits in the plan that single people will participate in as well. WHITFIELD: Donna LeValley and Jack Otter, thank you very much. Both of you from New York.
And if you want to know exactly how much you'll be saving, log on to cnn.com and follow the links to our tax bill calculator. Enter your adjusted gross income for 2002, and you will get an estimate of how much the Bush tax plan will be saving you and your family.
Well, enough talk about taxes for now. Time to talk about the beach. This summer's best deals when we come right back.
WHITFIELD: We're all well into the Memorial Day weekend, but you can still catch some travel bargains, believe it or not, this holiday if you still need to get away. Damon Tassone is the man to ferret out those last minute travel deals for all of us and help us cash in on travel bargains for this summer. He's the general manager of Site59.com, which specializes in last minute get-aways. Good to see you.
DAMON TASSONE, WWW.SITE59.COM: Good to be here.
WHITFIELD: It sure does seem like it's a little too late to look for any kind of get-aways for this weekend. Are you going to tell me no, not true?
TASSONE: That's exactly what I'm going to tell you.
WHITFIELD: OK. Where can we go?
TASSONE: Well, you can go, using Site59 from 76 origination cities in the U.S. to over 100 destinations. Most of those originations leaving tonight. We start trips going tonight.
WHITFIELD: No? OK, are we talking about driving or are we talking about flying?
TASSONE: No, these are all trips flying away. Most of our trips include air plus hotel. Some include air and car, and some include all three. And like I said, over 100 destinations for most ...
WHITFIELD: OK, give me an example. Where would I want to go this holiday weekend at the last minute?
TASSONE: You've got tons of choice. From New York City, we've got trips to both Boston and D.C., if you're feeling patriotic. A Memorial Day weekend, both of those trips are for either two nights or three nights, include air plus hotel, and both are under $250 per person.
TASSONE: Absolutely. If you want to go a little further afield, you can go to Nashville for under $350 per person. And then we've got trips to San Francisco and London, both leaving tonight as well, for three nights, under $500 per person for both of those.
WHITFIELD: Well, OK, so obviously no beach destinations. I mean, these are pretty landlocked, almost landlocked places, except for San Francisco, you've got the bay there -- and Boston. But you know, these are not necessarily places that people would ordinarily want to go for Memorial Day weekend. Is that why they're such great deals?
TASSONE: Well, those are all great deals, but we do have beach destinations as well. Florida, for the most part, is sold out, as is the Caribbean. But you can also go from New York or from other origination cities to L.A. or San Diego. We have trips from Los Angeles to Costa Rica, actually. That's a trip for about $600, versus about $2,500 if you were to buy that trip independently by the air separately and the hotel separately right now. So we do have some beach destinations available.
WHITFIELD: Wow. Pretty impressive. Now, for the summer, then, just looking ahead for those folks who do want to kind of think ahead, plan ahead now, what are the most popular destinations for the summer?
TASSONE: Absolutely. Well, actually, the beach destinations are very popular. Right now, for this weekend, as I said, the choices aren't as many. But for next weekend, we have over 300 destinations available. And it is off-season in Florida and the Caribbean, and so you can generally find great deals there.
WHITFIELD: Are you finding folks still want to stay fairly close to home? Meaning they want to keep this to domestic travel? They're not as apt to go internationally?
TASSONE: Well, it's interesting, in this past week, our 10th largest destination city was London. So a lot of folks, obviously from the East Coast, are still feeling adventurous and hopping on the plane to go across the Atlantic.
WHITFIELD: Damon Tassone, thank you very much, site59.com, appreciate it. Love those insights and those good deals.
TASSONE: Excellent. Have a great weekend.
WHITFIELD: All right. You too. Happy holidays.
Well, you're watching CNN, the most trusted name in news, and we've got much more ahead for you. "PEOPLE IN THE NEWS" is up next with profiles of Margaret Cho and Melissa Etheridge. Then, meet a man who many think took 40 bucks and turned it into millions gambling online. That's on "CNN LIVE SATURDAY" at 6:00 Eastern time. And stay tuned for CNN's "CAPITAL GANG," which comes your way at 7:00 Eastern. All that's straight ahead.
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