Fire under tax cut keeps going out

Sun Journal

oring: Except for a few conservatives, practically no one on Capitol Hill cares about a tax cut, once the rallying cry of every true blue Republican.

April 15, 1999|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON -- Two constants of life are death and taxes, so the saying goes, and it generally follows that people would much prefer to avoid both.

Yet in these flush days of soaring stock markets, budget surpluses, bountiful jobs and low interest rates, death is still unpopular but Republican politicians are having a heck of a time working up a passion for tax cuts.

Building toward today's income-tax deadline, GOP leaders have been staging hearings, news conferences, town meetings and publicity stunts to underscore what they say is an increasingly onerous burden.

In one effort to rub salt in the wound, they dug up a mock time capsule from "Tax Freedom Day, 1964": when they say Americans had to work until April 12 -- more than a quarter of the year -- just to pay their federal taxes. This year, they warn, Tax Freedom Day won't arrive until mid-May.

Now that the once-gaping federal budget deficit has been closed, many Republicans call the projected budget surplus an "overcharge" and promise to return it through an across-the-board rate cut of 10 percent.

Try as they might, though, the proposal just won't catch fire.

"One of the things I'm amazed at, is everywhere I go -- in grocery stores, walking through airports, in town-hall meetings -- nine times out of 10 when someone walks up and says something to me, it's: `Cut my taxes,' " says House Majority Leader Dick Armey of Texas.

But polls suggest that such comments don't translate into broad public support. "What we have now is a nation that's feeling very prosperous," Armey says, meaning the drive to cut taxes has lost its "sense of urgency."

Instead, voters tell pollsters as well as their lawmakers, they'd rather have extra money put aside for Social Security and other programs that will assure them a comfortable retirement.

"If there is a sense of insecurity that prompts somebody to say to me: `Gee, I'm really anxious about this, let's talk about it,' it's on retirement security," Armey says. "You find it in all generations."

Thus, the GOP has been forced to put President Clinton's pledge of "saving Social Security first" at the top of its agenda as well. What's more, the most likely tax cuts this year will come in the form of incentives for additional private retirement savings.

"I think the Republicans know that if their only accomplishment in this term of Congress is cutting taxes, we will regain control of the House," says Rep. Benjamin L. Cardin, the Baltimore Democrat. "Voters want a broader vision than that for the country's future."

Results from a February survey by the Pew Research Center appear to document the Republicans' dilemma.

When asked what they would prefer be done with any surplus left over from fixing the Social Security system, 65 percent of the respondents said the money should be directed to programs, such as education, the environment, health, crime-fighting and defense, while 27 percent chose tax cuts.

This is a frustrating development for would-be GOP tax cutters who have been dreaming of the day when the federal budget was sound enough for a nice, fat, election-year tax cut.

"It could be argued that the reason God put Republicans on Earth was to cut taxes," says Marshall Wittmann, of the Heritage Foundation. "Tax-cutting is the hallmark of the Republican Party."

It might also be argued that the GOP tax-cutters are victims of their own success.

The financial conditions that brought Ronald Reagan to power on a tax-cut platform in 1981 have been reversed -- largely through Republican efforts.

Double-digit inflation is gone, tax rates have not only been cut, but indexed to prevent backdoor rate increases through the "bracket creep" of inflation.

The belt-tightening crusade, launched in 1995 when the Republicans took over Congress, sent positive signals to the financial markets, helping to keep interest rates low.

At the state and local level, curbs have been placed on property-tax increases that often were more painful than income taxes.

Many states -- usually under the leadership of Republican governors -- have also cut income tax rates in recent years. James S. Gilmore III, Virginia's Republican governor, was elected in 1997 on a promise to eliminate his state's property tax on cars.

"It's not fair to say people aren't interested in tax cuts," says Grover Norquist, president of Americans for Tax Reform. "Tax-cutting is driving the agenda at the state level."

The federal tax bite is still huge -- expected to be nearly 21 percent of this year's Gross Domestic Product, the highest percentage since 1945. The GDP measures the total value of the nation's goods and services.

Much of the new money pumping into the federal treasury -- and bringing the budget into balance for the first time in three decades -- is coming from upper-income citizens whose tax rates were raised by Clinton and the Democrat-led Congress in 1993.

But the richer folks aren't complaining much because they're making a bonanza in the stock market.

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