Middle Class Needs to Read Budget’s Fine Print

President Clinton’s recently passed budget act does more than raise taxes. In fact, it’s one of the most sweeping bills in years.

Provisions in the new law apply to virtually everything from nuclear regulations to overtime pay for U.S. Customs Service employees. And if you are in the vast middle class, some of the bill’s lesser-known details could affect you far more than the well-publicized rate changes.

Here’s a summary of how some of the details of the Clinton budget law affect various groups:

* Students. Up-front fees on student loans will be dropped to 4% from a maximum of 8% starting in the 1994-95 academic year. The bill also reduces maximum loan rates and launches the much-ballyhooed direct-lending program, which will be administered by schools and paid for by the federal government.

* Campers. The law allows the Agriculture and Interior departments to start charging fees at a variety of national parks, monuments, scenic areas, boat-launching facilities, volcanic monuments and up to 21 “areas of concentrated public use.”

About half the nation’s 4,000-plus campgrounds are now free. Over the next year or two, more of the popular spots are likely to start charging entrance fees ranging from $5 to $12.

They may also charge so-called “use fees” if you stay overnight or use special facilities, such as showers and toilets.

Tourist areas such as Mt. St. Helens may also exact a toll on visitors, probably amounting to between $2 and $7. And boat-launching facilities that are on federal lands, such as at Roosevelt Lake in Arizona or Lake Arrowhead in California, may start charging user fees where they don’t already.

Senior citizens, who used to get into public parks and campgrounds free, will now also have to pay the tolls. But for $10 they can buy the newly created Golden Age Passport that gets them admission discounts.

If you’re a frequent visitor to public parks and campgrounds, you may want to buy a Golden Eagle Passport. It costs $25 annually and gets you into most areas free. You still would be subject to the user fees for overnight camp-outs. However, if you make more than three or four visits to fee-charging national parks, monuments or recreation areas in one year, the passport pays for itself.

* Veterans. You’ll pay a bit more for Veterans Administration loans starting this October. That’s because the budget bill hikes VA loan fees by about 0.75 percentage points.

Specifically, VA fees rise to 2% for those with less than a 5% down payment, to 1.5% for those with a 5% to 10% down payment and to 1.25% for those putting down more than 10%. Rates are higher for members of the Reserves and National Guard.

Additionally, if you buy a second or third house through the VA program, your fee rises to 3% if you make down payments of less than 5%, to 1.5% with a 5% to 10% down payment and to 1.25% with a down payment of 10% or more, says William W. White, a VA loan specialist.

In other words, think twice before applying for a VA loan. Low-down-payment financing may be cheaper in the open market.

Retired military members will also see their cost-of-living adjustments delayed. In 1994, adjustments that are normally given in January will not go into effect until March. In later years, the COLAs will be delayed until September. That’s likely to cost between $1,000 and $3,000, depending on your former rank and income.

* Children of wealthy parents. If your parents put money in trust accounts for you, interest earned on that money is likely to get taxed at much higher rates. Under previous law, income earned within a trust was subject to three tax brackets: the 15% bracket, which applied to income of up to $3,750; the 28% bracket, which applied to income between $3,750 and $11,250, and the 31% bracket, which hit income above those levels.

Under the new law, income thresholds have been reduced--in other words, you jump tax brackets more quickly--and there are five tax brackets.

Now the 15% bracket only applies to trust income under $1,500. The 28% bracket applies to income between $1,500 and $3,500; the 31% bracket kicks in between earnings of $3,500 and $5,500. You’re taxed at 36% on income between $5,500 and $7,500 and at 39.6% on income exceeding $7,500.

You can’t do anything about the hiked rates, but your parents may be able to. However, each of these strategies has a downside. They should consult financial or tax advisers before making a move.

* Seniors. In addition to hikes on Social Security taxes for more affluent retirees, Medicaid planning strategies have been severely restricted. One of the more popular tools, the so-called Medicaid Trust, is completely disallowed.

If you are a federal government retiree, your cost-of-living adjustment will also be delayed for three months starting next year. That will cost you a few hundred dollars over the course of the next several years.

Finally, if you’re wealthy, you should know that estate tax rates have been boosted from 3% to 5% for estates of more than $2.5 million.

If you’ve done Medicaid or estate planning, it is time to visit your lawyer. Some old strategies still work, but many popular ones, such as the Medicaid trusts, don’t. So-called elder-law specialists are already drawing up new types of trusts to conform to the changing law, says Armond Budish, a Cleveland-based attorney and author of “Golden Opportunities” and “Avoiding the Medicaid Trap.” In other words, it may be more complicated and costly, but planning is still possible.

* Realtors. You can deduct “passive” losses on real estate investments against ordinary income if you are actively engaged in the business of “real property trades” at least 750 hours a year and if real estate accounts for at least half your working hours.

* Investors. There are numerous provisions in the tax bill that affect you one way or another. Some encourage tax-deferred and small-business investing. Others knock out tax-related security purchases and sales.

Those who have applied in Federal Communications Commission airwave lotteries should also know that the bill allows the government to auction, rather than raffle, airwaves. While the government is not compelled to do so, it is likely that airwave lotteries will be eliminated because auctions are likely to raise more revenue for the federal government.