August 24, 2000|By Jonathan Weisman | Jonathan Weisman,SUN NATIONAL STAFF
WASHINGTON - On the final day of the Democratic National Convention, Al Gore drew thunderous applause when he charged that under the tax plan of his Republican opponent the "average family would get about enough money to buy one extra Diet Coke a day."
The campaign of George W. Bush fired back, declaring that the Texas governor - unlike Gore - was offering a plan that would cut taxes for everyone. Never mind that neither claim appears to be true. In a presidential campaign, close appears to be close enough, at least on taxes.
Taxes re-emerged this week as a crucial issue of the 2000 presidential campaign, not so much because voters are clamoring for a tax cut but because the vastly different approaches of the candidates speak volumes about their philosophies on the economy, the federal budget surplus and the distribution of wealth in a booming economy.
"I don't think one candidate or the other wins by saying `I'm for the bigger tax cut,'" conceded Grover Norquist, director of Americans for Tax Reform, which is pushing for deep cuts. "Still, it's a terribly powerful issue."
Thus far, the vice president seems to be drawing the most blood with a sustained attack on the Bush plan as overly generous to the wealthy and overly taxing on the federal budget.
Bush was forced onto the defensive this week, telling reporters he had to do a better job countering Gore's charge that his proposal would push the government back into deficit spending. But his overly complex explanation only compounded his problem.
"I've got to do a better job of making it clear that starting with a baseline of about $1.9 trillion over the next 10 years, the budgets will increase by about $3.3 trillion," Bush said. "And yet we've still got another $2.3 trillion of surplus. I think that when people understand that we've got a lot of money that we'll apply to different programs, ... people will buy into the tax-relief package even more."
The governor's plan - estimated to cost $1.3 trillion over nine years by the congressional Joint Tax Committee and $1.6 trillion over 10 years by the liberal watchdog group Citizens for Tax Justice - is ambitious. Tax rates would be cut at all income levels. The existing child tax credit would be doubled and made available to more-affluent couples. And the estate tax would be eliminated.
"Under the Bush plan, those needing tax relief most receive the largest percentage of tax relief," said Bush spokesman Dan Bartlett.
But that statement is deceptively simple. It is true that under the plan, the lowest tax bracket drops the most in percentage terms, from 15 percent to 10 percent. In comparison, the highest bracket drops from 39.5 percent to 33 percent.
But more than a third of taxpayers now pay no income taxes, though they and their employers do pay the 15.3 percent payroll tax for Social Security and Medicare. Since Bush does not address the payroll tax, the poorest workers could get no benefit. Bush does offer a $2,000 subsidy for the purchase of private health insurance that would be available to taxpayers who do not owe income taxes.
To show the fairness of his plan, Bush uses the example of a single waitress with two children, earning $22,000 a year, who pays a larger percentage of her income in taxes than a $220,000-a-year lawyer.
"Under my plan, she will pay no income tax at all," Bush has said.
The problem is that with existing federal tax credits, that waitress might pay no income tax already. She could benefit under the Bush plan, however, if she wanted to buy health insurance.
"Bush's speeches create the impression that there are substantial tax cuts for working poor families, and that the biggest tax cuts go to the poorest," said Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities. "That is simply demonstrably not true."
In fact, changes in the tax code since 1986 have made it nearly impossible to craft a broad-based tax cut that does not favor the rich because the rich pay most of the taxes. That is a point that Bush campaign spokesman Scott McClellan conceded.
Clint Stretch, director of tax policy at the accounting firm Deloitte & Touche, noted that the top 1.6 percent of taxpayers with incomes over $200,000 now pay 40 percent of all federal taxes, while the 56.3 percent of filers with incomes below $30,000 - 70 million households - paid 6.2 percent of the taxes.
Little wonder then that under the Bush plan, a family of four earning $35,000 would save $1,500, while the same family with earnings of $500,000 would save $18,600, according to a Deloitte & Touche analysis.
But Gore is taking liberties of his own to amplify the case against Bush's plan while inflating the case for his $500 billion package of targeted tax cuts and credits. He could make his Diet Coke quip work only by defining an "average family" as the bottom 60 percent of all taxpayers and including all the tax filers who pay no income taxes.
