Dole, Clinton to Compete on Tax Cuts

Sen. Bob Dole began laying the groundwork for a new tax-cut proposal Monday, while President Clinton sought to steal a share of the challenger’s limelight by readying a tax-reduction plan of his own.

Dole, who has hoped to recharge his campaign with an attention-seizing tax reduction, told a Michigan audience he is aiming to simultaneously balance the budget, reform the tax code and provide an across-the-board cut in income taxes.

“We must [do all three] if we want to restore our nation to its full economic potential, with faster growth, great opportunity and rising living standards,” he said.

Clinton, for his part, plans to announce a proposal today for a tax break to help defray the cost of students’ first two years of college. The plan, to be unveiled at the Princeton University commencement, is intended to be “the icing on the cake” of Clinton’s earlier proposal to give families up to $10,000 in tax deductions each year for educational expenses and job training, officials said.

One source said the White House will structure the new tax break as a credit to offset tuition expenses. A credit is of more use to lower- and middle-income families than is a deduction, which is not available to families unless they itemize deductions on their tax returns.

Dole strategists have hoped their candidate’s tax-cut proposal would help the GOP candidate by setting him apart from Clinton. But the White House is calculating that Clinton can blunt any such advantage by offering a targeted tax cut aimed at helping families with one of their greatest financial burdens.

The White House also apparently will offer offsetting federal spending cuts, allowing Clinton aides to claim that their tax reduction will not set back the cause of trimming the deficit.

Dole has not said how he would pay for any tax cut proposal.

Figuring out how to offer an attention-getting tax cut while still proceeding with deficit reduction has been a puzzle for Dole. Many of his advisors have pushed for large across-the-board cuts, but Dole has made clear he still considers cutting the deficit a priority.

Senate sources confirmed on Monday that, in addition to an across-the-board 15% tax cut, Dole is considering a two-rate system--set at 28% and 15%.

That option is being considered, in part, because private analysis has shown that, under an across-the-board 15% cut, more than 80% of the benefits would go to taxpayers in the top third of the nation’s income distribution, while only 1% of the savings would go to the bottom third.

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Noting that Clinton in 1993 pushed through Congress a $265-billion tax increase, Dole declared: “I intend to go in precisely the opposite direction.”

“I believe a federal budget that is balanced in the right way--with less spending that permits lower taxes--is a key, a critical key, to making America better for families and to restarting America’s engine of economic growth.”

Dole made his remarks on the subject at a Chamber of Commerce luncheon here, after meeting in Washington with Republican elders to discuss campaign strategy.