A GROWING FAMILY SEES REAL HELP FROM THE EXTRA MONEY

In the war on taxes, Shoreline residents Paul and Heather Savage are willing foot soldiers.

Neither rich nor poor, they lead a modest but comfortable life that, like many families, revolves around their children, their community and their work. And like millions of middle-class families, the Savages eagerly embrace the idea of lower taxes.

They were one of two dozen “tax families” enlisted by President Bush during the campaign to highlight the need for tax cuts, and like Bush, they believe lower taxes are fair and necessary.

“We skimp and we save, and we probably live differently than a lot of people, ” said Heather Savage, 31, a homemaker and mother of four. “We’re not struggling day to day … but a tax cut would really help us out in the long run.”

In many ways, Bush had families like the Savages in mind when he decided to push forward with what would be the biggest tax cut in 20 years. Indeed, when Bush outlined his tax plan in February, he described its benefits in a way that could have been taken from the Savages’ life.

“A typical family with two children will save $1,600 a year on their federal income taxes,” Bush said Feb. 27, using a family of four making $50,000 to illustrate the benefits of his tax proposal.

“Sixteen hundred dollars buys gas for two cars for an entire year; it pays tuition for a year at a community college; it pays the average family grocery bill for three months,” he said.

In advocating a tax cut, Bush stresses that it’s only fair to give money back to the people at a time when the federal government enjoys a surplus. Unspoken but openly suggested by advocates is that even successful middle-class families could use some relief from financial pressures.

The Savages understand all of it. Bush’s emphasis on a tax cut was a major reason that both decided to vote for him in November.

Heather clips coupons and drives the family’s 5-year-old car.

Paul Savage, a tax attorney, rides the bus to and from work.

And the couple rent out their basement “to make ends meet.”

But they could be doing better – and with the sweeping tax cut that Congress is poised to pass this week, the Savages say they will move closer to that goal.

The Senate’s vote on its final version of the tax-cut plan is expected tonight, with a House-Senate conference committee expected to iron out the differences by the end of the week.

Under any of the proposals making their way through Congress, Paul and Heather Savage stand to pay at least $2,000 less in taxes each year, by as early as 2006.

Some kind of tax cut is a certainty; at issue are the magnitude and beneficiaries. Democrats are largely pushing for bigger cuts for low-income taxpayers and smaller reductions for those in the highest tax brackets.

Legislators also are trying to balance tax breaks with budget cuts to make room for it.

Among the programs that could be axed or trimmed to accommodate the tax cut are Project Impact, a Federal Emergency Management Agency program that has helped protect Seattle against earthquake damage, and cleanup at the Hanford Nuclear Reservation.

Also vulnerable are the federal Drug Elimination Grant Program, which pays for extra police in high-crime public housing developments, Boys & Girls Club activities and drug-rehabilitation programs.

The Savages aren’t alone in believing that social programs such as those are best kept in the private sector and out of the reach of the federal government. Paul Savage said he would rather see private charitable organizations stepping in to combat social ills, instead of “inefficient” government programs regulated and run outside the area.

“There needs to be kind of a cultural rethinking of our problems. We need to take responsibility for our neighbors … instead of having the help come from a nameless, faceless entity in Washington,” he said. “If we try to solve all of our social problems with federal programs, that means we have to keep our tax rates high, putting pressure on families, who have to work more. Instead of having a little extra free time to dedicate to community issues, they end up working more to meet the tax burden so a bureaucrat in Washington can … decide how to solve the problems.”

Critics of the massive tax cuts point out that it would be years before most people see much relief.

While the money wouldn’t be a windfall for the Savages, it would allow them to sock away more money for retirement, save more to send their four children to college and make larger payments on their mortgage and Paul’s student loans.

“We would probably focus (the savings) in the direction of getting more financial security,” Heather Savage said. “And any tax cut will make what we do have go farther.”

Now, when they pore over their federal income tax return, the Savages scramble to write off expenses and make deductions.

“You’re just looking for any kinds of tax breaks you can find,” said Paul Savage, 36. “The system is kind of skewed against you.

“The traditional notion of the tax brackets” doesn’t take into account taxpayers’ situations, Savage said. “If you’re just starting out with a family, you can be … overwhelmed.”

All three of the major tax bills competing for votes in Congress (Bush’s proposal along with one from House Republicans and a more bipartisan effort in the Senate) are written with people like the Savages in mind. They all include doubling the child tax credit to $1,000 as well as larger deductions to compensate for the so-called “marriage penalty.” Each proposal lowers tax rates across the board. Each would eventually get rid of the estate tax.

Complicated though it is – in both economic and political terms – it’s easy to see the appeal of tax cuts if viewed through the Savages’ eyes.

From the Savages’ three-bedroom home, where Heather spends her days caring for the two pre-school-age children, any extra money from the government is welcome.

“There needs to be money in the pockets of our consumers as quickly as possible,” Bush said in a May 11 news conference, during which he repeatedly called tax relief the quickest way to deal with soaring gasoline and energy costs.

But the bulk of tax cuts would still be years away, under Bush’s proposal and the two measures in Congress. Critics charge that the plans are back-loaded, with their real cost coming after 2011, when the cuts are fully phased in, and with the biggest tax cuts coming only after several years.

“Do people understand the payoff won’t come for six, eight, even 11 years?” Sen. Patty Murray, D-Wash., asked rhetorically in an interview last week. “No. They don’t, and it’s actually a real concern of mine. People have actually said, ‘When will I get my $1,200?’ They don’t realize they will have to wait six years, eight years.”

“We’d like to see it sooner; we’d like to see the thing front-loaded, of course,” acknowledged Gary Strannigan, director of the Washington State Citizens for a Sound Economy, a conservative group pressing for Bush’s tax cut. “The sooner we can get these tax reductions into the hands of the people, so the people are keeping more of their money, the sooner our economies will begin to rebound.”

Just as Bush has cited the nation’s precarious economy in drumming up support for his tax proposal, Strannigan said that sweeping tax cuts could immediately boost the flagging economy on the verge of a recession.

“The immediate effect could be a sense of optimism,” even if cuts are phased in over 11 years, Strannigan said. “I see immediate vigor in our economies as a result of this.”

Although Bush’s plan – and to a lesser extent the House and Senate proposals

– have been criticized for giving the biggest tax breaks to the nation’s wealthiest residents, that’s just good business sense to Paul and Heather Savage.

Both said they count on the wealthiest taxpayers to drive the economy by spending the tax savings on goods and services and stimulate it through investments.

Paul said tax cuts for the nation’s richest residents free up venture capital that “allows the small guy on the street to improve his station in life.”

“So much of the debate is focused on one person gets a muffler while another person gets a Lexus” from a tax break, Paul Savage said.

“If you’re a Lexus dealership, you don’t mind people buying a Lexus. And if you make cars, you don’t mind, either.”P-I reporter Jennifer A. Dlouhy can be reached at 202-943-9225 or jdlouhy@hearstdc.comP-I reporter Charles Pope can be reached at 202-943-9229 or charliepope@seattlepi.com

NOTES:

TAX CUTS AND COSTS

GRAPHIC: Color Photo, Chart

(1) GILBERT W. ARIAS/P-I: Tax attorney Paul Savage and his wife, Heather, live in the Shoreline area with their four children. They own their home and rent out the basement. They stand to see a $2,000 tax saving. The children are Marie, 7; Anna, 9; Susanne, 3; and Joseph, 1.(2) SEATTLE POST-INTELLIGENCER: TAX CUT PLANS AT A GLANCE