ELECTIONS ’92 : Budget Watchers Check Off Reactions to Bush’s Tax Plan : Deficit: Some call the IRS form idea a ‘gimmick’ while others say it could press Congress to cut spending.

President Bush’s proposal to allow taxpayers to allocate up to 10% of their taxes to reduce the national debt was greeted Friday with derision by some budget experts and cautious optimism by others.

“It’s a gimmick,” said Carol Cox Wait, president of the Committee for a Responsible Budget, a bipartisan group here dedicated to reducing the budget. “I can understand trying to build political pressure to deal with the problem, but it’s not going to reduce the debt” because the accompanying spending cuts Bush called for will not be approved, she said.

Economist Stephen J. Entin, of a conservative, free-market think tank, said the idea could work and would give taxpayers a way to send a message to their representatives.

The checkoff idea was the most dramatic and one of the few specific elements of the broad outline Bush put forth Thursday night as he tried to launch a tax offensive against Gov. Bill Clinton and lay claim to the central issue that has led to Republican victories in the last three presidential elections.

In his speech accepting the Republican nomination, Bush staked virtually his entire economic package on a proposal to cut taxes across the board--provided the reductions are offset by spending cuts he considers appropriate. While Bush did not specify the nature of the tax cut, aides said it would probably come in the form of a tax-rate reduction.

The size of potential spending cuts is enormous, possibly $100 billion a year when coupled with earlier reductions Bush has advanced but did not specifically address Thursday. Bush said Social Security would be exempt from reductions, and he has previously refused to authorize additional cuts in defense spending. As a result, the likely targets are such programs as Medicaid, Medicare, farm supports and student loans.

While many details are still missing, Bush’s plan offers voters a sharp contrast with Clinton. The Democratic nominee has advocated boosting the economy through direct government spending in programs he says would create jobs. Clinton would pay for his $220-billion, five-year plan with a combination of deeper defense cuts and some $150 billion in higher taxes, mostly on Americans earning more than $200,000 a year and on some corporations.

Some economists and budget experts warned that spending cuts at the level proposed by Bush would slash too deeply into popular programs to be politically acceptable to most Americans.

“He is talking about big reductions in Medicaid and Medicare spending,” said Jeff Faux, president of the liberal Economic Policy Institute. “What we don’t need in the face of the nation’s health care crisis is to knock the props out from under people.”

But Entin said big spending cuts could be coupled with tax credits that would help the elderly who use programs such as Medicare to fill the gap.

“This kind of program won’t be easy to get passed in Congress, but it’s feasible,” said Entin, of the Institute for Research on the Economics of Taxation here. “And the checkoff is a way for the people to tell Congress how far they ought to go in cutting spending.”

Some ideas in Bush’s speech were part of his economic growth package that stalled in Congress earlier this year. That proposal sought to cap the growth of all mandatory government spending programs except Social Security, saving $293 billion over five years. But its call for smaller reductions in Medicare and other services proved so controversial that Administration officials later had to describe them as possibilities, not actual proposals.

Bush also has long advocated a line-item veto and reduction in the capital gains tax as ways of controlling spending and stimulating the economy. Again, he has run into congressional opposition.

The proposed taxpayer checkoff, however, broke new ground and reversed the Administration’s earlier opposition to the idea. Bush said taxpayers should be allowed to earmark up to 10% of their annual taxes to reduce the $4 trillion national debt by checking a box on their tax returns. Government spending would have to be cut an equal amount for the plan to work, he said. Congress would have to approve the checkoff program and the corresponding spending cuts.

Individual taxpayers will pay an estimated $515 billion in federal taxes next year. If everyone took the full 10% checkoff, the plan would reduce federal spending across the board by $51.5 billion.

The proposal was a version of an idea floated in July by Rep. Robert S. Walker (R-Pa.) and Sen. Bob Smith (R-Ore.). They estimated that two-thirds of the national debt could be eliminated in 12 years under the plan.

The Administration has rejected similar checkoff proposals, including ones for reducing the debt. “We have consistently opposed proposals that would have added voluntary checkoffs to the tax return, regardless of how meritorious the beneficiary,” Terrill A. Hyde, the Treasury Department’s top tax lawyer, testified before Congress in May.

Clinton’s economic aides responded Friday by attacking the Bush plan as unrealistic and too broad. They also charged that the Bush campaign has distorted Clinton’s tax record by claiming the Democratic presidential nominee “raised taxes 128 times” during his 11 years as governor of Arkansas.

In fact, Clinton did propose several tax increases as governor--most notably several increases in the state sales tax to finance increased spending on education. But the GOP count vastly overstates the number of Clinton tax increases.

For example, when Arkansas increased its excise tax on fuel, the GOP counted the increase as two new taxes: one on gasoline, one on diesel fuel. A tax increase on alcohol counts as five new taxes under the GOP count: one on beer, one on spirits, one on wine coolers and so on.

The Republicans also counted as a tax increase such items as a new law ordering criminals to pay $1 per conviction in court costs and a 1987 law lengthening the season at the state’s dog racing tracks.

The Clinton campaign noted that Clinton also has produced 48 tax decreases during his gubernatorial years. Overall, Arkansas ranks as one of the nation’s lowest tax states--47th in the country in taxes as a share of personal income.

While many business people said Friday they still preferred Bush to Clinton, few contacted Friday were enthusiastic about the economic content of the President’s speech.

“It’s the same story I’ve been hearing from him for a long time,” said Henry Leo, president of Prema Precision Machining, an aerospace parts manufacturing company with 50 employees in Chatsworth, Calif.

Leo said he agreed with Bush’s ideas for tax cuts, a line-item veto and reductions in federal regulations, but said the speech lacked detail. “There was no meat and potatoes,” he said.

While Leo said he was afraid of a Clinton presidency, he predicted little improvement of the economy under a second Bush Administration. He said continued government gridlock could lead to renewed voter interest in Ross Perot or another independent candidate.

Other business people were even harder on Bush. “There was a lot of blaming other people (and not) himself for what he hasn’t done,” said Maxine Ransom Von Phul, president of Winmax Construction Corp. in Los Angeles.

“I had hoped to hear him roll out an economic plan for the U.S.,” she said. “I heard a lot about foreign policy. But American people are concerned about jobs for American people.”

Ransom Von Phul, who is chairwoman of the Black Business Assn. of Los Angeles, said what Bush’s plan lacks is major public works projects that would “create a lot of jobs.”

As expected, organized labor found little to like about the proposals.

Rex Hardesty, an AFL-CIO official here, ridiculed Bush’s proposed checkoff, saying: “I don’t think it will have any standing with serious people. I don’t think serious people would jeopardize majority rule by introducing individual discretion into our tax forms.”

Hardesty also said Bush’s across-the-board tax cut proposal “is nothing but a continuation of supply-side trickle-down economics, which has been a disaster for the nation, and we see those chickens coming home to roost now.”

Times staff writers David Lauter in Detroit and Susan Moffat and Stuart Silverstein in Los Angeles contributed to this story.