Clark Offers ‘Simple’ Yet Sweeping Tax Reform

Retired Gen. Wesley K. Clark on Monday unveiled the most sweeping tax-reform plan of any of the Democratic presidential hopefuls, a plan he said would dramatically simplify tax returns and benefit 31 million families without increasing the budget deficit.

Under Clark’s proposal, a family of four making up to $50,000 a year would pay no federal income tax at all, and all families with children making up to $100,000 would see a reduction in their tax bill. The retired four-star general says he would offset the loss in tax revenue by asking millionaires to pay more.

His proposal is a decidedly liberal approach, as well as one that clearly sets him apart from the Democratic front-runner, Howard Dean, whose call for repealing all of President Bush’s tax cuts has been attacked by rivals as hurtful to the middle class.

Clark’s plan also is designed to call greater public attention to his campaign.

He is hoping for a second-place finish in New Hampshire’s Jan. 27 primary and an ensuing bounce going into the Feb. 3 primaries and caucuses in South Carolina and several other states where his tax code could resonate.

Clark’s tax-reform plan is his most significant in domestic policy, and it is geared primarily to help people with children.

It also is designed to vastly simplify the complicated federal tax code.

“My tax-reform plan is simple,” he told a gathering of community leaders here. “Those who make the most should pay more. Those who make the least should pay less.”

Under Clark’s plan, people could determine whether they needed to pay taxes by answering three simple questions about their income, their marital status and their number of children. They would not need to file tax forms if they did not owe the government money.

Currently, a family of four making $50,000 pays $1,583 in federal income taxes.

The campaign did not provide a price tag for Clark’s plan but said it would not cost the government any money. Lost revenue would be made up primarily by the roughly one-tenth of 1% of American families who earn $1 million or more a year. They would be asked to pay more in taxes. Clark has said he would like to raise the taxes for top earners by 5 percentage points.

Clark also said he would repeal Bush’s tax cuts for those making more than $200,000 a year and would close loopholes that allow businesses to avoid paying taxes by moving money to offshore banks, for example.

“Right now, the sad fact is that too many Americans are working harder and harder and earning less and less,” with inflation having surpassed growth in income, Clark said.

“Under George W. Bush, the typical working family has seen its income fall by nearly $1,500 annually. As incomes have fallen, expenses have gone up.”

Mindful that conservatives might criticize his plan as that of a tax-and-spend Democrat, Clark took them on directly, specifically Bush political advisor Karl Rove.

“Karl, I want you to hear me loud and clear, “ Clark said. “I am going to provide tax cuts to ease the burdens for 31 million American families, and lift hundreds of thousands of children out of poverty, by raising the taxes on 0.1% of families -- those who make $1 million a year. You don’t have to read my lips; I’m saying it.

“If that makes me an old-style Democrat, then I accept that label with pride and dare you to come after me for it.”

Among the Democratic contenders, Dean and Rep. Dick Gephardt of Missouri have offered plans to abolish all of Bush’s tax cuts, while others have pledged to do away with the tax cuts to the wealthiest Americans.

And Sen. Joe Lieberman of Connecticut has offered a plan that would abolish tax cuts to the rich and increase those to the middle class.

But no candidate other than Clark has put forth a proposal so radically different than the existing federal tax code. Any change in the code would need to be approved by Congress.

“This is nothing more than a Mini-Me version of Lieberman’s plan,” said Lieberman spokesman Jano Cabrera, referring to the diminutive character in the “Austin Powers” movies.

Cabrera also criticized the proposal for giving no tax cuts to couples with children who make more than $100,000 -- Lieberman’s plan would cut taxes for everyone making less than $200,000 -- and for not granting any relief to single people or childless couples. The Clark campaign based some of its proposals on the work of Jeffrey B. Liebman, a professor of public policy at Harvard’s Kennedy School of Government.

Liebman said that he was asked to review the plan, and that he believed it would greatly benefit lower-middle-class families and would simplify the rules for giving tax breaks to parents.

Under the current tax code, several measures affect the deductions granted to parents, such as income, number of people in the household and the age of children.

The system is so complex, Liebman said, that 68% of people who use the Earned Income Tax Credit pay someone to do their taxes for them.

Clark’s plan would give parents a flat credit of $250 for each child.

Parents “don’t need to be wasting their time figuring out what a child is,” said one Clark advisor.

Clark spoke repeatedly Monday of “progressive” tax reform. He also said he hoped to do away with “Tax Day” for the millions of Americans with relatively simple finances by having the Internal Revenue Service collect taxes throughout the year.

Those with more complex finances -- or anyone who wants to -- could still file a 1040 form to claim deductions.

The Clark campaign said that it had calculated that the collections could be carried out without requiring more employees at the IRS, and that the candidate’s proposal for tax reform might help streamline the agency because much of the IRS’ current work involved dealing with mistakes made on the complicated returns.

Some rivals said Clark’s broad plan still did not cover all the high-income bases.

Sen. John Edwards of North Carolina wants to limit the top rate on capital gains to 25% for those earning $350,000 or more, and a spokesman criticized Clark for exempting capital gains from his higher tax on those earning $1 million.

After the speech, Clark said he began working on tax reform the week he announced his candidacy in September. It was born, he said, of his own struggles to get by on a military salary.

“It’s not only filling out the tax forms” that’s difficult, Clark said, “it’s trying to find that extra hundred dollars to get by.”

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Tax policies

The Democratic presidential candidates’ proposals for taxes:

Carol Moseley Braun

Supports rolling back President Bush’s tax cuts that help the wealthiest Americans.

Wesley K. Clark

Would eradicate taxes for families making $50,000 or less with two or more children. Plans to raise taxes on the top 0.1% -- those who make $1 million or more -- by 5 percentage points. Would give a flat, $250-per-child tax credit. Supports closing corporate tax loopholes.

Howard Dean

Wants to abolish Bush’s tax cuts. Hopes to end corporate tax loopholes and eliminate tax shelters. Would boost Internal Revenue Service resources to help the organization collect billions of dollars in back taxes.

John Edwards

Would repeal the Bush tax cuts that aid the wealthiest 2% of Americans. Wants to limit the top rate on capital gains to 25% for those earning $350,000 or more. Advocates tightening corporate tax regulations.

Dick Gephardt

Would repeal Bush’s tax cuts entirely, using the revenue to pay for his wide-ranging health-care plan, which would cost $2 trillion over 10 years.

John F. Kerry

Would create a tax-relief fund of $50 billion for states over two years to end college tuition increases and help cover health-care expenses. Plans to preserve and expand middle-class tax cuts approved by Bush, including the child tax credit and the reduced marriage penalty, while abolishing tax cuts to those who make more than $200,000. Supports a crackdown on corporate tax breaks.

Dennis J. Kucinich

Introduced the Progressive Tax Act of 2003 in Congress, to give $87 billion to working families and collect $107 billion from Bush tax cuts and corporate “giveaways.” The bill includes a $1,530 payroll tax credit and a $2,000 family credit to consolidate different child tax credits.

Joe Lieberman

Would preserve middle-class tax breaks but favors reorganizing the income-tax brackets and expanding tax credits for low-income families. The restructuring would raise taxes for those making $200,000 and above, plus repeal the dividend tax and reform the estate tax. Also supports eliminating corporate subsidies backed by Bush.

Al Sharpton

Advocates repealing the Bush tax cuts in full.

Compiled by Los Angeles Times staff researcher Susannah Rosenblatt.

Los Angeles Times