Sunday, May 21, 2006

The Velvet Military Draft

The Bush administration refuses to reinstate the military draft. Why bother?

The alternative plan is not only to force teenagers to enlist but to make as much money as possible doing so. As you know, college loans are no longer guaranteed reasonable rates of interest. Those borrowing will be paying that debt until they're in their late middle ages.

Now, comes news that this administration has found a way to punish families that save as well. From the Courant;

The kiddie tax was created nearly 20 years ago. It affects a child's unearned income - typically interest, dividends and capital gains. It does not apply to money that a child earns on a job.

As it now stands, the tax applies to those under 14. The first $850 of a child's unearned income isn't taxed. The next $850 is taxed at the child's rate. Anything above that is taxed at the parents' rate.

After children turn 14, investment income is taxed only at their rate, not the parents'.

Under the new tax bill, the kiddie tax would apply to those under 18. The change would be retroactive to the start of this year.

Here's how the change would affect a child's tax bill:

Assume that a 15-year-old's tax rate is 10 percent and that her parents are taxed at 35 percent.

If the teen has taxable interest income of $10,000, under current law her tax bill would be $1,123, said Bob D. Scharin, a senior tax analyst with RIA, a provider of tax information in New York. Once the kiddie tax age limit is raised, her tax bill would go up to $3,283, he said.

Soon the only teenagers who will be able to afford college will be those receiving GI benefits. Maybe that's the new draft, strangle higher education.

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