Babbitt Urges $50-Billion Sales Tax to Reduce Deficit

Charging other presidential candidates with “a conspiracy of evasion” in dealing with the federal budget deficit, Democratic White House aspirant Bruce Babbitt Thursday outlined a plan for a national sales tax to take in about $50 billion a year, the most ambitious revenue-raising proposal yet advanced in the 1988 campaign.

“We’ve been dancing around the truth, nickel-and-diming the deficit with proposals that don’t scratch the surface of the problem,” Babbitt declared in a National Press Club speech. “If we want to get the federal budget under control, we’ll have to do it the old-fashioned way: We’ll have to cut spending and raise revenues.”

Babbitt, who earlier proposed curbing government outlays by requiring that all spending be justified on the basis of need, called for “a progressive national consumption tax.” He estimated that such a levy, at the rate of 5%, even with provisions for softening the bite on lower-income groups, would yield about $40 billion to $60 billion a year.

Tax Held Regressive

Economists generally regard sales taxes as regressive because they fall more heavily on lower-income groups, who have to spend a greater percentage of their income than the affluent, who can afford to save and invest.

But Babbitt contends that his version, which could be imposed either at the point of sale or incrementally at several stages between manufacturer and retailer, could be made progressive through the use of tax credits for lower-income groups or by exempting such necessities as food and housing from taxation.

Babbitt called his plan “simple and fair, with no loopholes and no special breaks: Everyone pays it and every transaction is taxed the same way.” He said he had considered several other options, including raising income taxes, but concluded that such an approach would be wrong so soon after the sweeping tax revision enacted in 1986.

“I would not raise the income tax as President,” he said.

Rivals Have Own Plans

Several of his Democratic rivals have advanced proposals of their own. Massachusetts Gov. Michael S. Dukakis called for stepped-up enforcement of the tax laws, Missouri Rep. Richard A. Gephardt has recommended a $5-a-barrel oil import duty and Delaware Sen. Joseph R. Biden Jr. has proposed increased levies on liquor and cigarettes.

But Babbitt dismissed those measures as inadequate. “Does anyone really believe we can balance our budget with a ‘sin tax’ or an oil fee?” he asked rhetorically. “Is there one serious economist who thinks we’ll find a tenth of the answer in (tougher tax law) enforcement?”

Advisers to the former Arizona governor acknowledge that his proposal is a big gamble, noting that most other Democratic aspirants have held back from advocating big revenue increases, in part because they recall the negative reaction to 1984 standard-bearer Walter F. Mondale’s campaign vow to raise income taxes.

But Babbitt’s strategists contend that their candidate, who has been having trouble raising campaign funds and making headway in the polls, cannot afford not to take risks.

Plan Draws Criticism

Whatever benefit Babbitt may eventually gain from depicting himself as being forthright enough to call for new taxes to combat the deficit, he has already drawn criticism from other presidential campaigns in both parties.

Former Delaware Gov. Pierre S. (Pete) du Pont IV, a Republican contender, attacked Babbitt’s tax plan as “certainly consistent with the theme of the Democratic Party that we need more taxes, more tariffs and more regulations,” a notion Du Pont labeled as “kamikaze economics.”

And John Sasso, campaign manager for Democrat Dukakis, said: “The governor feels strongly that, before we raise taxes, we need to enforce the tax laws and collect amounts running up to $20 billion or $30 billion a year in tax revenues that are now uncollected.”