As Tax Proposal Grows, So Does Distrust of Clinton : Politics: Clinton was elected with a mandate to raise the taxes of the well-to-do. But with all his plans, he’s beginning to look like a taxaholic.

Kevin Phillips, publisher of the American Political Report, is the author of "The Politics of Rich and Poor." His most recent book is "Boiling Point: Republicans, Democrats and the Decline of Middle-Class Prosperity" (Random House)

Just as some kids become chocoholics, some politicians become taxaholics. Bill Clinton, for one, is starting to look like one--which helps explain his declining job approval, the growing skepticism toward his economic pro gram and the resurging popularity of America’s fiscal watchdog, Ross Perot.

Public concern about rising tax burdens is well-founded. The average family must worry that the $300-$400 more a year they’re likely to pay in new energy taxes could double or triple if that tax gets established, and enactment of the suggested national sales tax could mean an even bigger nibble.

Meanwhile, upper-middle-class business people and professionals, especially the self-employed, are seeing their late-1980s memories of combined federal and state marginal tax rates of 30%-35% prospectively replaced by 45%-50% rates because of new brackets, self-employment levies and surtaxes. The 1990s are becoming a tax-increase decade.

However, though Congress was busy last week passing budget resolutions that ratify the outlines of the President’s economic program, the final congressional decisions on whose taxes will go up and by how much are still months away. Indeed, current polls assert that portions of Clinton’s program could be in serious trouble unless he can provide new and convincing answers to an all-important question: How can Washington revitalize the U.S. economy and refurbish the American Dream by raising a slew of federal taxes when the average American family is already paying at record peacetime levels?


And it’s not just what’s on the table--it’s what’s on the horizon. No one can remember a previous Administration in which so many possible new taxes were mentioned, whispered or leaked in the weeks before and after the new President’s inauguration. This is where the taxaholic tendencies get worrisome.

Besides Clinton’s official proposals--his proposed energy-consumption tax, the increased levy on the Social Security income of retirees making more than $32,000, a new top income-tax rate of 36% and a surtax on those earning more than $250,000 a year, as well as removal of the cap on the Medicare self-employment tax--many other fiscal trial balloons have been going up over Washington. These include: a possible value-added tax or national sales tax, a higher gasoline impost, a new tax on employee-health benefits above a certain level, steeper taxes on tobacco, wine, beer and hard liquor and some kind of payroll levy or other assessment to pay for a new national health program.

Tax revolts against revenue tactics in a number of states are further aggravating the electorate’s sensitivity to federal pocket-picking. Washington hasn’t seen anything like it in generations--and never from a President who campaigned on an essentially opposite promise!

Public discontent is serious. One public opinion poll reports that Clinton has the weakest March job approval of any new President in at least 50 years. Polls show support for Clinton’s economic program, once at about 60%, dropping much lower. Some 48%-52% of Americans now support the Clinton proposal while 35%-44% are opposed.


This March slump reflects a growing belief that Clinton’s economic package puts too much emphasis on taxes, in general, and on two proposals, in particular. According to the most recent Time/CNN poll, voters still endorse the proposed income-tax increases and surtaxes on the richest 1% of Americans by 4-1. Solid majorities, however, now oppose Clinton’s proposed energy tax, as well as the White House plan to increase the tax burden on some Social Security recipients.

Political unrest is growing. On May 1, Texas will hold a special U.S. Senate election for the seat vacated by Treasury Secretary Lloyd Bentsen, and the Democrat filling that seat in the interim, former-Rep. Robert Krueger, sees Clinton’s tax package as so unpopular in Texas that he’s not supporting it. Whatever happens in this race can only embarrass the White House.

Tax indignation is certainly spreading at the state level. The Republicans have been doing surprisingly well with anti-tax themes in early 1993 special state legislative elections--because at the same time voters are worrying about a Pandora’s box of new taxes at the federal level, they are also fearful about the state level. Income-tax increases on the top 1% or 2% have passed in a number of regions without arousing voters, but other new charges and taxes are triggering debate--especially a new surge of state and local taxes on soda pop. Clinton’s proposals are starting to look like they’re part of a serious new wave of federal-state-local taxes on the average family--a far cry from his 1992 campaign rhetoric.

Upper-middle-class Americans, the top 2% or 3% below the 500,000 genuinely rich, have a special reason to feel deceived. Candidate Clinton promised there would be no tax increase on those making under $200,000 a year. He then broke that promise by dropping the cutoff to $140,000 a year, while extending a Medicare self-employment tax and simultaneously targeting a 10% income-tax surcharge on those making more than $250,000 a year--not just on millionaires as he had said. For many professionals and small-business people in these income groups, the marginal rate of federal, state and local income, along with FICA, taxes will soon be in the 50% range. There’s already a lot of talk about finding tax shelters and cutting back on working hours rather than paying such a high tax--and if upper-middle-class economic activity slips, so could federal revenue.


The public’s sense of having been misled may be part of Clinton’s problem. He was indeed elected with a mandate to impose his new 36% top income-tax rate and surcharge on millionaires. What he didn’t get was a mandate for breaking tax promises or imposing broad energy taxes and steeper Social Security levies. In addition, budget deficit reduction isn’t his central motivation. Clinton clearly favors a broad array of new public outlays for health, infrastructure and education, and that’s the real spur for new federal taxes.

That’s presumably why he has already discussed establishing a value-added tax or national sales tax at some future date, despite the likelihood of a public furor. In the last five years, new national consumption-tax proposals have produced angry middle-class political firestorms in Japan, Canada and (just this month) Australia. Average American families presumably would feel just as politically and economically violated.

Yet the extent to which Middle America must now keep an eye open for this or some other megatax from Clinton--who only yesterday was proposing middle-class tax reduction--goes a long way toward explaining why public distrust in Washington is again setting records. Indeed, recent ABC News polling found a whopping 78% of Americans trust the government in Washington to do what was right only some or none of the time--up 15 points from 1992.

It is this concern about still another bamboozling by yet another Washington Republicrat-Demopolican regime embracing special interests, lobbyists and higher taxes that has sent a growing number of Americans again turning their hopes and TV dials to Perot and his politics of frustration. Clinton, who once seemed to be the man to fulfill hopes for a new fidelity in Washington, is losing some of that aura, while the latest Time/CNN poll shows Perot’s approval rating at a record 59%. In addition, 52% of Americans want Perot to create a third political party to compete against the Democrats and Republicans.


It is time for Clinton to take another weekend in Camp David, to ponder anew his 1992 promises and to think about how the American Dream may once again be souring. Frustration with his Administration over taxes and support for Perot against Washington-as-usual both send the same message: The new President is in danger of becoming part of America’s problem, not part of America’s solution.