‘A Political Wash’ : Neither Party Seen Gaining From Tax Bill

For months, Republicans have ballyhooed the tax revision crusade initiated by President Reagan as a sure-fire way to burn the Democrats and turn the GOP into the nation’s dominant political party.

Once and for all, declared Republican National Chairman Frank J. Fahrenkopf Jr., tax overhaul would remove “the albatross that Franklin Roosevelt placed around our necks--the idea that all we care about is big corporations and the wealthy.” He predicted that a tidal wave of low-income Americans--the heart of the traditional Democratic constituency--would migrate to the Republican fold.

Effect on Economy

But, even though Congress is poised to enact a tax overhaul bill that will remove 6 million poor people from the tax rolls, increase taxes for corporations and eliminate many tax shelters used by the rich, analysts of both parties are now dismissing the notion that the bill will spur any such far-reaching political realignment.

The ultimate political fallout, they say, will be determined more by how the legislation affects the economy than by how it affects individual taxpayers.

In fact, if the sweeping tax revision package wins final approval as expected shortly after Congress returns Sept. 8 from a three-week recess, it will probably have little impact on November’s congressional elections except for giving political protection to incumbents of both parties who are seeking reelection.

To begin with, taxpayers will not directly feel the effects of the bill until next year or beyond. The deepest cuts in tax rates are not scheduled to take hold until 1988, and taxpayers do not have to file tax returns for that year until April 15, 1989.

Beyond that, Democrats are as much entitled as Republicans to claim political credit for tax overhaul. The version of the bill originally passed by the House was mainly the handiwork of Democrats. And when a House-Senate conference committee approved the bill in final form on Aug. 16, Democrats were unanimous in their support.

‘Plenty to Talk About’

“Everybody knows legislation of that magnitude had to have bipartisan support to get through, and they know that tax equity is a hallmark of this party,” said Democratic National Chairman Paul G. Kirk Jr. “So Democrats will have plenty to talk about in 1988,” when voters will choose a successor to Reagan.

The economic issues in November’s congressional elections, he said, “will be trade and deficit, but not taxes.”

In response, Fahrenkopf insisted that Republicans are “entitled to the lion’s share of the credit” for tax overhaul and predicted that they will benefit more than the Democrats from enactment of the bill.

But he acknowledged: “There isn’t any one issue that will result in party realignment. It’s a series of things, and one of the things could be an arms control agreement that protects the country’s interests and limits the possibility of nuclear war. That’s the last big goal on the President’s agenda, and I have confidence he’ll accomplish it.”

Scant Impact in 1986

Robert Teeter, who has done polling for the White House, also sees tax overhaul as having scant impact on the 1986 elections. And over the long run, he said, the tax measure will become an issue only in the event of a spurt of economic growth--or a recession.

“If the economy performs well over the next year or two,” he said, “tax reform will get credit and that’s good for Republicans. But if it doesn’t do well, two or three things are poised to catch blame--the deficit, trade and the tax bill--and that would be bad for Republicans.”

Although Washington lobbyist Edward J. Rollins, Reagan’s former assistant for political affairs, thinks that the tax issue will be “a political wash” in the short run, he said it could become a major issue in the long run, depending upon “how well people like it and how it is perceived as affecting the economy.”

Mitchell E. Daniels Jr., Rollins’ successor at the White House, said tax overhaul “certainly helps cement President Reagan’s place in history as a bold, successful leader and is a giant step toward helping erase the old caricature of the Republican Party as too concerned with the interests of big business and too little concerned about little people.”

Two-Year Odyssey

But he agreed that the bill’s political impact would be neutral this year and uncertain beyond that.

Throughout tax revision’s two-year odyssey through Congress, it never attracted much public enthusiasm. Even after the bill cleared the conference committee, a poll by Action Surveys found that fewer than half of the respondents favored the bill and that fully one-third had no opinion. More people thought they would have to pay more taxes than less, even though Congress insists that winners will outnumber losers by a margin of 4 to 1.

For that reason, said William Schneider, a political analyst with the American Enterprise Institute and a political consultant to The Times, politicians of both parties had little to gain by supporting the tax overhaul. But incumbent congressmen had plenty to lose, he said, if they had failed to pass the bill that Reagan had made the top domestic priority of his second term, a bill that many special-interest groups had labored long and hard to kill.

‘The Dead-Cat Theory’

“Congress would have been seen as failing to stand up to the big interests,” Schneider said, “and incumbents would have been hurt.” That, Schneider said, is why the tax bill is on its way to enactment in the first place.

“It’s the dead-cat theory,” said Martin D. Franks, executive director of the Democratic Congressional Campaign Committee. “Nobody wanted it left on their doorstep. If the Republicans had succeeded in killing tax revision in the House, the Democrats would have left that dead cat at their doorstep.”

Although the Democrats never got that opportunity, Franks said they reaped another form of benefit from the tax debate. Democratic tax writers in Congress repeatedly insisted that the tax bill provide greater tax relief for the middle class, Franks said, and as a result, two polls this summer showed Democrats holding a 2-1 lead over Republicans as the party best able to protect middle-income Americans.

Democrats Led 42% to 20%

A poll taken in June by William Hamilton for Franks’ committee showed that the Democrats led Republicans by 42% to 20% when people were asked which party best protected the interests of the middle class. Two years ago, a Hamilton poll showed a Democratic margin of only 40% to 31%.

Similarly, a poll last month for the campaign committee, by Targeted Systems Inc., showed the Democrats with a 60%-30% edge.

For all that, some Democrats fear that supporting the bill ultimately could boomerang on the party. They say the Democrats, by backing a bill that nominally has only two individual tax rates--15% and 28%--have abandoned the party tradition of supporting sharply progressive income taxes.

Opinion polls show strong public support for the idea of progressivity, that is, that people with large incomes should pay higher tax rates than those with low incomes.

Sen. George J. Mitchell (D-Me.), chairman of the Senate Democratic Campaign Committee, predicted that Congress would raise the top rate within a few years--”once people realize that a single person of taxable income of $17,500 will be paying the same rate as millionaires.”

“It’s unfortunate Democrats participated in the legislation,” Mitchell said. “They were just afraid to be seen as against tax reform.”