Adding the Bill

As anyone who has sat down with Form 1040 and a pocket calculator knows, figuring the tax due on a given income even under present rules is no easy task. Gauging the effect of hypothetical tax changes such as those proposed by Walter Mondale is still more difficult. His program:

1) Less generous indexing. Under full indexing, which goes into effect next year, the amount of income subject to a particular rate of tax is adjusted upward each year by a percentage equal to the inflation rate. Mondale, however, would index the incomes of families earning more than $25,000 a year only to the extent that inflation exceeds 4% annually. If the inflation rate is 5%, their incomes would be indexed by 1%.

2) Rate increases. Married couples with adjusted gross incomes of more than $60,000 a year ($45,000 for single taxpayers) would lose the reductions they got in July 1983, when the third stage of the Reagan tax cuts took effect. Adjusted gross essentially is salary, interest and dividend income plus some additions--a portion of capital gains, for example--and minus such things as alimony paid and contributions to an IRA. For a couple with two children, personal exemptions and average itemized deductions would shrink an adjusted gross of $60,000 to a taxable income of around $42,200. Tax rates on the top slices of taxable incomes higher than $42,200 now range from 33% to 50%; under Mondale's plan most of these rates would go up two or three points.

3) A surcharge. Couples with adjusted gross incomes above $100,000, and single taxpayers earning more than $70,000, would figure their tax liability under Mondale's new rate schedule, then add 10% to it.