With Congress in recess, congressmen and senators of both parties have fanned out across the country singing the praises of the tax and budget package signed into law by President Bill Clinton last week. However, they are likely to find average Americans far less enthusiastic about the deal that House Budget Committee Chairman John Kasich (R-Ohio) called "a dream come true." In fact, the more they explain the details to their constituents, the more likely members of Congress are to find that support for their efforts evaporates.

To start with, the tax cut is minuscule and targeted so that most Americans will see no reduction in their taxes at all. Virtually all of the tax relief is aimed at children, in the form of a $500 credit and tax cuts for education expenses. Together, these provisions account for 82 percent of the total tax cut. Thus anyone without children under the age of 17 or in college is basically out of luck.

But even if you have children of the right age, you may still miss out. That is because there are income limits on the availability of the child credit and the education provisions. Couples filing jointly lose the child credit at an income of $110,000, single heads of households lose the credit at $75,000 and couples filing separately lose the credit at $55,000. Income limits for the education incentives are even lower, with eligibility phasing out at an income of just $40,000.

Ironically, with all the talk of tax cuts, the effect of imposing phase-outs is to raise marginal tax rates for many taxpayers.

• The child credit is reduced by $50 for each $1,000 of income above the cap.

• This is equivalent to a marginal tax rate increase of 5 percent on the range of income between $75,000 and $85,000 for a single parent with one child.

• More children, and thus a larger credit, increase the amount of income subject to the higher de facto tax rate.

To be sure, the capital gains tax cut to 20 percent will help some taxpayers. However, most middle-income taxpayers with capital have it mainly tied up in their homes or retirement accounts like 401(k) plans. They probably were not going to pay taxes on the sale of their house anyway, and most retirement accounts are already tax-free. So they will benefit very little from this provision.

Individual Retirement Accounts were also expanded, but as in the case of the child credit there is an income test that will prevent many taxpayers from taking advantage of it. Estate and gift taxes are reduced, but at such a slow rate it will barely compensate for inflation.

Offsetting all of this will be higher taxes for airline tickets, for smokers and many businesses. Indeed, much of the cigarette tax increase will fall on people with incomes too low to qualify for the child credit. And the higher taxes on airline tickets will fall disproportionately on those flying in economy class or on discount airlines.

Finally, Congress was forced to add over $100 billion in new spending to the budget in order to buy Bill Clinton's signature on the tax cut. The spending increases include $24 billion for a new health insurance program for children and $15.5 billion in additional welfare benefits. As a consequence, the federal budget deficit next year actually will be higher than it would have been without the budget deal.

Meanwhile, the balanced budget in the year 2002 that everyone is so keen on celebrating is critically dependent on $97 billion in spending cuts that do not take effect until that year. Yet politicians continue to wonder why voters have become cynical and apathetic.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, August 13, 1997.