In '96, some taxing problems

July 31, 1995|By Carl P. Leubsdorf

WASHINGTON — A RECENT discussion by Jack Kemp of the issues that dominate national politics provided an insight into why the former New York congressman and housing secretary decided to bypass the Republican presidential race.

On matters from affirmative action to immigration, Mr. Kemp seemed estranged from his party's current orthodoxy. He opposes the GOP retreat from affirmative action, calls some moves against immigration "police state tactics" and cautions against going too far in the Waco hearings.

A longtime advocate of lower tax rates, he opposed the $500 tax credit that is a key part of the congressional Republican program and warned against eliminating the earned income tax credit for the working poor.

He decided not to run, he conceded, because "I didn't know if there's a niche now for my issues."

But the man who helped create the Kemp-Roth across-the-board tax cut plan that played a major role in Ronald Reagan's 1980 victory still hopes to have a significant impact on his party's effort to regain the White House next year.

His vehicle is the special tax reform commission, created by Senate Majority Leader Bob Dole of Kansas and House Speaker Newt Gingrich of Georgia to reconcile the disparate tax proposals of many top Republicans and create a unified platform for 1996.

"We're going to flatten the tax system for everyone," Mr. Kemp promised. But he indicated that unlike some Republicans, he doesn't necessarily favor a single rate.

If the one-time pro quarterback succeeds in crafting a broadly acceptable plan, he would do more than provide his party with an appealing tax position. He would give Mr. Dole, its most likely nominee, a growth-oriented, future-looking platform that might overcome the potential disadvantages of his age, business-as-usual demeanor and lengthy Washington tenure.

But Mr. Kemp faces a tough task. In recent months, many leading figures in the party -- including House Majority Leader Dick Armey of Irving, Texas, House Ways and Means Committee Chairman Bill Archer of Houston and Sen. Dick Lugar of Indiana -- have produced tax proposals with significant differences.

Mr. Armey would eliminate virtually all deductions, including interest on home mortgages, extraordinary medical costs and charitable contributions. He would apply a single rate, starting perhaps at 20 percent but eventually going down to 17 percent, to wages, salary and pensions. Dividends and interest income would not be taxed.

Mr. Archer, meanwhile, wants to end the income tax and replace it with a broad-based consumption tax such as a sales tax or a value-added tax. But he delayed an announcement of his preference until later in the year.

Mr. Lugar also proposed eliminating the income tax, along with the Internal Revenue Service. He favors a 17 percent national sales tax. Other Republicans have called in varying forms for a simpler, flatter tax system.

Democrats have been slower to enter the tax reform field. But in recent weeks, House Minority Leader Dick Gephardt of Missouri presented a plan that maintained more progressivity than the GOP proposals.

It would eliminate all deductions except the home mortgage deduction and allow about three of every four taxpayers to pay a 10 percent tax and file their returns on a postcard. But it would maintain four brackets for higher-income Americans up to a top rate of 34 percent.

Sen. Bill Bradley of New Jersey, like Mr. Gephardt a leader in the 1980s' effort to craft a simpler tax system, says he'll present his own plan later in the year.

The administration, by contrast, has confined its efforts to limiting the GOP cut to middle-class taxpayers and to its own more modest plan for a deduction to cover college tuition. Its goal was to provide the relief for middle-class taxpayers that Mr. Clinton pledged in 1992 but withdrew in 1993 on grounds he faced a more severe deficit than he anticipated.

But it hardly seems likely that the president and his top advisers won't become engaged in the debate if the GOP comes up with a major tax plan and makes it a centerpiece of its 1996 campaign.

The administration's problem may be to do so in a way that gives it credibility but avoids the bidding war that marked tax cut efforts of the early 1980s.

Many experts still believe that episode played at least some role in the subsequent ballooning of the federal deficit and fear that additional cuts could exacerbate the situation now.

Carl P. Leubsdorf is Washington bureau chief of the Dallas Morning News.

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