Flat tax foibles GOP boobytrap: Like Medicare, it would offend multitudes of middle class voters.

January 23, 1996

SEN. BOB DOLE has it about right when he says "there's nothing President Clinton would like more" than Republican acceptance of the extremist version of the flat tax advocated by his upstart rival, magazine publisher Steve Forbes. The Forbes proposal is a set-up for Democratic jibes that the GOP once again is trying to help the wealthy at the expense of the middle class.

Actually, the flat tax deserves better. If carefully drawn to pass the fairness test, it would restructure the tax system to encourage production and savings rather than consumption. The problem is in practicality. No one has come up with a credible formula that would prevent another explosion of voodoo deficit financing.

The purist flat tax that has propelled Mr. Forbes to second place in Republican presidential polling would eliminate the mortgage and charity deductions, all taxes on dividends, interest, capital gains and inheritance and the earned income tax credit for the poor. His foes have painted him as a rich man looking after his own economic class. Their aim is to puncture the Forbes candidacy faster than it ballooned.

Sen. Phil Gramm and commentator Pat Buchanan have made it clear they want to keep a mortage deduction that sustains the housing market and a charity deduction that will encourage voluntary social giving. Sen. Dick Lugar is sticking to his proposed national sales tax. Gov. Lamar Alexander would roll back tax rates but avoid revolutionary change. As a result, Republicans are engaged in an intra-party free-for-all that might be a worthy addition to economic debate but could be as politically poisonous as their well-intentioned efforts to restrain the growth of Medicare. Hearings by the Senate Finance and House Ways and Means committees may be pivotal.

Medicare, like the mortage deduction, is a highly prized middle class benefit. Therefore, some savvy Republicans question the wisdom of making a big election-year deal of two issues so vulnerable to Democratic demagogy.

So far, even Speaker Newt Gingrich admits he has dropped the ball on Medicare. If Republicans now offend the middle class on mortage deductions -- the passport to the American dream of home-ownership -- future historians may be writing about how they kicked away an election that could have been won.

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