Made a Mistake With Tax Hike in 1990, Bush Says

TIMES STAFF WRITERS

President Bush said Tuesday that he made a mistake in 1990 when he reneged on his campaign promise not to raise taxes and agreed to an increase as part of a compromise with Congress.

Speaking to reporters before departing for a brief trip to Illinois, the President said that the decision to retreat from his pledge "probably wasn't worth it," given the "political flak" that has ensued.

Now, on the campaign trail, Bush finds himself pummeled on the issue by the Democratic candidates on the left and by GOP rival Patrick J. Buchanan on the right.

Ironically, as Bush was expressing his regret over the tax increase, the Senate Finance Committee was approving a Democratic-backed alternative to the President's tax-cut plan. A key feature of that plan would raise taxes on the rich to finance a middle-class tax cut.

In the event anyone had doubted it before, Bush's remarks Tuesday served to reiterate his opposition to such a measure and his plan to respond to it with a swift and emphatic veto.

Approval by the Finance Committee came on an 11-9 party line vote as Democrats joined forces to push through the proposal drafted by the committee's chairman, Sen. Lloyd Bentsen (D-Tex.).

The measure, which would provide middle-income families with a tax credit of $300 for each child under 16 years of age, is expected to go to the Senate floor sometime next week. The House already has passed a similar version.

The outlook for the Democratic tax bill in the Senate still is uncertain. Although House Democratic leaders had difficulty mustering support for the measure on the House floor last Thursday, the measure appears to be somewhat more popular in the Senate.

Even so, senators are expected to try to load the measure with special-interest provisions, some of them by Democrats in return for their support of the bill in the Finance Committee on Tuesday. After the Senate passes its version of the legislation, a conference committee would work out differences between that bill and the House version.

Meanwhile, Republican senators signaled that rather than try to block passage of the Democratic measure, as had been expected, they may move to help push it through so that Bush will have an earlier opportunity to veto it.

Senate Minority Leader Bob Dole (R-Kan.) told the Finance panel Tuesday: "The bottom line is as long as this bill contains a tax increase, it's going to be vetoed and the veto is going to be sustained. Let's get on with it. Get it on the Senate floor."

Besides Bentsen's own tax proposals, the package includes all seven of the emergency "economic growth" tax provisions that Bush has asked Congress to enact by March 20--ranging from added cuts in capital-gains tax rates to new home-buying incentives.

And it includes several elements long sought by the most influential Democrats, from proposals for direct government loans to students to provisions designed to broaden workers' access to medical insurance policies.

But the Bentsen plan radically dilutes Bush's capital gains tax-cut proposal and alters many of the other six provisions in the President's plan. And many Democrats still found fault with the tax provisions, even though their own proposals were included.

The tax issue playing out in the Senate committee and on the campaign trail Tuesday overshadowed the purpose of Bush's Illinois trip. A 19-minute speech to the 50th anniversary convention of the National Assn. of Evangelicals in this suburb of Chicago, coming one week before the Super Tuesday voting in much of the South, was planned to highlight Bush's stated opposition to abortion and a proclaimed affinity for many of the other issues dear to the fundamentalist Christian movement.

When Bush's first expressions of regret over the 1990 tax increase--made during interviews Sunday--attracted little attention, the White House made a concerted last-minute effort Tuesday morning to publicize his comments as voting began in the primary elections.

Bush's admission that he had made a mistake in agreeing to a tax increase two years ago marked a stunning political confession for an incumbent President--and a reflection of just how deeply in trouble Bush may be, particularly among conservative Republicans.

The tax increases that were enacted as a result of Bush's acquiescence that year boosted the top rate paid by the highest-income wage-earners to 32%, from 31% before, imposed a new luxury tax on expensive autos, planes, boats and furs and raised taxes on alcohol.

In explaining his rethinking of the issue Tuesday, Bush cited political rather than economic reasons for his change of heart--including the political heat he has taken during the campaign this year and the latest move by Democrats to raise taxes on the rich.

"This just gangs up on you, plus the political flak out there," he said, explaining his retreat.

He also reiterated that he plans to veto the Democratic tax legislation, which again would raise taxes on the rich partly to help finance tax reductions for the middle-class.

"It's getting intense, as you know," the President said. "The House passed a tax bill which I'll veto and now, much to my consternation, you see the Senate going about the same old business. So this just gangs up on you."

Still, while his confession may placate some conservatives, Bush's latest twist on the tax issue risks drawing attention not only to the fact that he abandoned the pledge--"Read my lips: no new taxes!"--of his 1988 presidential campaign, but to his readiness to shift his position when he is under political fire.

But Torie Clarke, Bush's campaign spokesman, argued that voters already "are thinking about" the tax pledge, among other economic questions, and Bush strategists deemed it important to make clear his current thinking on the matter.

"It is an issue," she said.

Gerstenzang reported from Rosemont, Ill., and Pine from Washington.

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