Tax Cuts Are Worthless, Even to Buy Votes : Economy: Cut the deficit and spend on necessities, Americans tell pollsters; raising taxes on the upper bracket is the ticket.

With an eye on the November elections, President Bush and Congress are quarreling over whose plan for cutting taxes is better. But in a year when the federal budget deficit is expected to reach a staggering $400 billion, we have no business cutting taxes at all.

Neither the President’s nor the Democrats’ proposals, which the House will vote on this week, is likely to help the economy now, and either approach is certain to make it worse in the long run. We would be wise to drop the idea of cutting taxes altogether and concentrate instead on investing in human and physical resources and on reducing our annual budget deficit--even though that would require raising the taxes paid by the wealthiest Americans.

Raising any taxes at all is usually considered heresy in an economic slump, but this is no ordinary recession. The country faces two very different economic challenges: ending the recession, and reversing the far more serious long-term problem of slow growth caused by too much borrowing and spending and too little saving, investment and productivity. Unfortunately, the usual remedy for recessions--deficit spending--is precisely the opposite of what is needed to promote sustained economic growth and strengthen our ability to compete in the global market.

As economists have been saying for years, reducing our federal budget deficit is the most important step the government can take to increase jobs and productivity over the long term. Cutting federal borrowing would free up more of our nation’s limited savings for private capital investment. It would also make more tax dollars available for investment in public programs the country needs because it would slow the rising cost of paying interest (now more than $200 billion annually) on the national debt. Cutting taxes, which would increase our deficit, would simply plunge us further into debt.

Not only would tax cuts exacerbate our long-term problem; they also would do very little to stimulate the economy. The reductions being proposed are too small to generate much consumer activity, and, in this uncertain climate, people would be more inclined to apply their few extra dollars to pay off debts.

Cutting taxes might not be politically smart, either. Many voters view these proposals more as an election-year ploy than as any substantial help for themselves or for the economy. Recent polls show that very few Americans believe a tax cut would help end the recession. This was corroborated by a Times poll released on Feb. 14, which found stronger support among Americans for boosting domestic spending and reducing the deficit than for cutting other taxes.

The Democratic tax proposal, unlike the Republican plan, at least has the virtue of not increasing the budget deficit for the next five years. But it squanders an important potential source of revenue--a higher tax on the wealthy--on a measure that would neither help the economy nor do much to improve the lives of individual Americans, a waste of revenue that could be put to much better use. And, it sets Congress up for the unhappy choice two years from now between allowing its key middle-clas tax cut component to expire (thus raising taxes in the next election year), or extending the tax cut and thus increasing the deficit substantially.

Most economists believe that the lower interest rates and softer housing prices we are already seeing will do far more to stimulate the economy than any initiative Washington could come up with. But since most politicians seem to feel that it is necessary to do something now, we ought at least to act in a way that is consistent with what needs to be done to strengthen our economy over the next several years: We should start spending more money on programs to improve the skills of our work force and update our infrastructure. More investment in such areas as education, job training, research and development, new technologies and roads and bridges is essential if we are to improve our ability to compete successfully in the international marketplace and generate jobs that pay steadily rising wages.

We should pay for this new and necessary spending by raising the taxes of the richest Americans--those families, earning in excess of $200,000 a year, whose incomes soared during the 1980s while their federal tax burden declined by about one-third. A modest increase in the top marginal tax rates for these families could raise $20 billion every year, which would pay for a significant increase in the investment our country desperately needs.