Income tax surtax proposed to pay gulf expenses

December 06, 1990|By Stephen E. Nordlinger | Stephen E. Nordlinger,Washington Bureau of The Sun

WASHINGTON -- Representative Dan Rostenkowski, D-Ill., chairman of the House Ways and Means Committee, advocated yesterday that an income surtax be imposed to pay for the American forces in the Persian Gulf.

The extra tax would be added to whatever a taxpayer already owes.

The surcharge -- which would cover the U.S. share of the cost of Operation Desert Shield, whether or not a war occurs -- would need to be about 5 percent, raising an estimated $13.5 billion in 1991, according to the Congressional Budget Office.

"We are spending a tremendous amount of money just by our deployment there," Mr. Rostenkowski said. "The administration is going to have to come up with some proposal to pick up the tab."

The Bush administration, already scarred by the tax increases in the new budget deficit reduction package, reacted coolly to the idea of a surtax.

"It is not the time to consider any such tax," said one White House official. "We are not even certain what the cost will be."

A surtax is not expected to be part of the budget proposal that President Bush will send to Congress in February, the official said.

But the chief House Republican, Minority Leader Robert H. Michel of Illinois, did not reject the proposal. "I'm not going to prejudge anything," he said.

Earlier in the week, the top Democrats on the congressional budget committees -- Sen. Jim Sasser of Tennessee and Representative Leon E. Panetta of California -- had called for a surtax to pay for the gulf operation should a war occur.

But Mr. Rostenkowski, considered the most influential voice in Congress on tax policy, went one step further in urging a tax to cover the gulf costs even without hostilities.

The Pentagon estimated three months ago that the cost would be about $15 billion in the current fiscal year, based on the initial deployment of 210,000 troops.

But the Congressional Budget Office said last month that this cost would grow by about 60 percent to cover the deployment of more than 150,000 additional troops now being sent to the area.

Defense officials have expressed hope that about half the ultimate cost would be borne by Saudi Arabia, Kuwait and other countries. That would leave about $12 billion to $13 billion to be paid by U.S. taxpayers.

Should a war occur, however, the costs of Operation Desert Shield would escalate rapidly.

Costs of the Persian Gulf operation were not included in deficit-reduction calculations for the new budget agreement, so none of the new taxes in the package -- including higher gasoline taxes -- were aimed at paying for this operation.

The revenue from a surtax, though, would be earmarked for this purpose.

Without a surtax, the government would have to borrow the funds, putting pressure on interest rates.

"We really haven't focused on the cost of the exercise in the Persian Gulf," said Mr. Rostenkowski. "The people aren't aware we are spending the kind of dollars weekly that we are. When that surfaces, you are going to have to see some reaction from either the Congress or the president of the United States as to how we are going to pay for it."

Mr. Rostenkowski said President Lyndon B. Johnson made "the biggest mistake in the world" by refusing for several years to raise taxes in the 1960s to pay for the Vietnam War.

A surtax was finally imposed in 1968.

Many economists contend that Mr. Johnson's reluctance to raise taxes promptly was at least partly to blame for the spiraling inflation of the 1970s.

A 10 percent surtax was imposed from April 1968 through December 1969.

The result was the government's last budget surplus -- completing the year 1969 $3.2 billion in the black.

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