The burden of the federal government`s $500 billion deficit-reduction package would be borne by most kinds of U.S. consumers, from the idle rich to the forcibly idled. Even the lovesick would feel the pressure.
The purchaser of a $200,000 Rolls-Royce would face an excise tax of $17,000, and the buyer of a $1 million boat would ante up $90,000 in new taxes under parts of the package that were hammered out by congressional and White House negotiators.
Most workers who lose their jobs would have to wait an extra week for their first unemployment checks, and purchasers of jewelry costing at least $5,000-a fancy engagement ring, for instance-would find the price slightly more memorable.
The unemployment compensation proposal would make the newly jobless wait two weeks after a layoff before coverage kicks in, up from the one-week delay that now exists in 41 states, including Illinois. The Office of Management and Budget estimates this would save the government $3.165 billion over the next five years (the Congressional Budget Office puts the savings at $4.6 billion). Illinois labor officials blasted the idea. ”This will have a devastating impact on people who need the money,” said Susan Altman of the Illinois AFL- CIO.
A number of proposals would directly affect workers and consumers, among them the increases in cigarette and liquor taxes that were widely publicized when the budget accord was announced. But several changes that drew less attention will also affect millions of Americans.
For example, the many state and local government employees not now covered by Social Security would have their participation become mandatory, complete with the mandatory deductions from their paychecks. This would add $11.7 billion in revenue by fiscal 1995.
Most of the same employees also will find themselves added to Medicare for the first time. This will bring the government another $5.2 billion; taken together with the Social Security tax increase, such a worker earning $51,300 (this year`s cap for payroll deductions) would see his take-home pay reduced by $3,924. And if the proposal to increase the cap for Medicaid deductions from all workers` checks to $73,000 is adopted, that bite would grow to $4,239.
Factor in increases in taxes on necessities like gasoline and heating oil, as well as discretionary purchases like airline tickets or alcohol, and a paycheck`s purchasing power shrinks quickly.
The combined impact of the various tax increases envisioned for gasoline and refined petroleum would add 12 cents to the cost of a gallon of gas, not a happy prospect for consumers already all too aware of the effects at the pump of the Persian Gulf crisis.
”This is going to hurt,” said Cecil Rogers as he pumped 20 gallons of gas into his 1971 Chevy Malibu at the a gas station on Illinois Highway 19 in Bensenville.
”I think this is terrible,” said Carrie Gall, a senior citizen who works part-time at Lutheran General Hospital in Park Ridge to help make the payments on her Buick. ”My God, we are paying enough already. Gasoline, for people who live in the suburbs, is a necessity. What are they trying to do, drive us all out of jobs?”
Similar increases in the price of jet fuel, as well as a 2 percent hike in the tax on airline tickets, come at a difficult time for the major airlines, which twice have increased ticket prices in the last two months because of rising fuel prices. The Air Transport Association, a trade group representing most major airlines, called the proposal-which the negotiators said would be worth $11.8 billion over five years-”particularly outrageous.” ”The airlines are already losing money at an all-time record rate,”
said William Jackman, a spokesman for the association. ”This year, projections are that we`re going to lose $1.25 billion, with similar losses next year. There isn`t much room for airlines to absorb the new tax.
”It reminds me of the sin taxes,” Jackman said. ”It seems it is becoming a sin not only to drink and to smoke, but also to fly.”
The sin-tax increases themselves are ”certainly going to have a sizable impact on sales,” said John B. Burcham Jr., executive director of the National Liquor Stores Association in Bethesda, Md. ”Consumers come to the point of a buy or a no-buy situation. There will certainly be a number of consumers, the moderate drinkers, who will say, `This is one thing I can do without.` ”
”It`s going to kill our business,” said Don Lamasky, owner of Buy Low Liquors, 3200 W. Irving Park Rd.
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The proposal calls for raising the tax on wine from 3 cents per bottle to 24 cents, but Jerry Rosen, chairman of the executive committee of the Illinois Liquor Stores Association, said the increase to consumers could be 50 to 75 cents after all the associated costs are passed along.
As for the tobacco industry, the proposal would raise the cigarette tax, now 16 cents a pack, to 20 cents in 1991 and 24 cents in 1993
More upset are the purveyors of diamonds, sables and luxury cars, whose customers are the targets of a 10 percent excise tax that would raise $1.9 billion by 1995. The tax would be on the portion of the cost of jewelry and furs that exceeds $5,000; on cars, the portion over $30,000; and on boats, the portion over $100,000.
”We know the government needs money, but if you`re going to call it a luxury tax, tax all luxuries,” said Michael Roman, chairman of Jewelers of America Inc., a trade group.
”Aren`t country club memberships a luxury? What about an $80 million painting, or antique furniture? It`s just not fair, and it`s highly discriminatory.”
Although sales of goods in the luxury price ranges are less affected by economic downturns, the businesses subject to the new tax have been suffering a slump the last year or two.
The already depressed boating industry, for instance, which has lost an estimated 100,000 jobs in the last two years, could lose another 8,000 because of the tax, according to the Chicago-based National Marine Manufacturers`
Association. It`s not unusual for a 35-foot boat to exceed the proposal`s $100,000 threshold.
The jewelry business, too, is experiencing difficulties, said C.F. Lahrman, president of Chicago`s C.D. Peacock jewelers. He said Peacock`s does an estimated 25 percent of its business on items that top $5,000, and the added tax could mean lost sales and job cutbacks for all jewelers.
But if the revenue-raising measure goes into effect Jan. 1, as proposed, one effect might be to make some luxury retailers have a happier Christmas selling season. People expecting to make a luxury purchase may hurry to do so before the tax takes effect.
And since the tax would apply only to the first retail sale of newly manufactured items, a used Lamborghini might suddenly take on new appeal.