"People are always nervous about changes in tax law, and they're skeptical about the benefits," Jenner said. "But overall, wages have gone up, and after-tax income has gone up significantly," Warshawsky added.
Of course, many Washingtonians have come out ahead -- way ahead. Last year, with his firm revving back up, a Cleveland Park businessman who discussed his finances only on condition of anonymity pulled down more than $1,035,000 in salary and bonuses. His wife, a federal employee, chipped in $45,000, giving the family of four a sizable income that enjoyed tax rate cuts in every income bracket, including the top, which was lowered from 39.6 percent to 35 percent.
Airline copilot Al Aitken says property taxes have eaten up his federal tax savings and then some; maintenance mechanic Donald Belton faces rental inflation; brew-pub owner Jerry Bailey says his late-'90s profits have evaporated.
(Gerald Martineau -- The Washington Post)
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The couple also received $33,512 in taxable dividends last year. Before Bush took office, those would have been taxed at the ordinary income rate of 39.6 percent. But last year, Congress slashed the dividend rate to 15 percent. All told, the businessman's taxes fell $44,500 from where they would have been under the Clinton-era tax code, according to Deloitte & Touche. With the assessment of his house more than doubling since 2001, his property taxes have risen by $4,320. But rising gas prices had negligible impact on a commute of just four miles. The household's net gain? About $40,000 a year.
Down the income scale, the picture looks considerably different. Serkalem Nessibu, an Ethiopian immigrant in her forties, moved to the United States in 1979 and since then has achieved a middle-class existence. She and her husband have a three-bedroom house in Accokeek, in Prince George's County, and two children, one of them on the way to college this year.
To help support it all, Nessibu works one full-time job answering the phone at a downtown Washington hotel. After her shift ends, she typically packs up and goes to a second job, working until recently as a supervisor at a diner. Altogether, she works 70 to 75 hours a week, and brought home $38,000 last year for her efforts. Her husband was laid off from his job with an electric utility when there was a merger two years ago, and he now works part time driving a bus while looking for permanent work.
Altogether, Nessibu's family made about $50,000 last year, and she paid about $1,100 less on her federal taxes than she would have had the Bush tax cuts not been enacted. But the family took home about $60,000 back in 2000, when the economy was booming, Nessibu received ample overtime at the hotel and her husband worked full time. They bought a house in 2000, and the property tax has zoomed from about $800 to almost $2,000, more than enough to negate her gains from the federal tax cuts.
She took her 15-year-old son out of public school and he now goes to a Catholic school that costs $8,000 a year. And with her 18-year-old daughter starting college, Nessibu is having to take out loans to pay for education.
Routine costs also have risen. The co-payment for medical care is $15, up from $10. Her car insurance shot up when her kids turned 16.
"The groceries and the gas, everything seems to go up in price," Nessibu said. "Everything I make goes to pay basic living expenses or pay for my children's education. I really appreciate being here in America. I just hope the second generation will be more successful than we are."
Bailey's tale also illustrates the wider economic headwinds facing Americans these past years. He pays himself $100,000 to run the brew pub. His wife, a government epidemiologist, earns $120,000. But the real money once came from their 22 percent ownership in Old Dominion Brewing, a share that yielded $132,000 in additional income in 1999, when the pub cleared $600,000. As the air leaked out of the Northern Virginia technology bubble, Bailey's brewery suffered collateral damage. Profits slid to $535,000 in 2000, $197,000 in 2001, $86,000 in 2002 and just $3,397 in 2003.
