Bush Aims Squarely at GOP’s Right Wing With Tax Cut Plan

After the release of Wednesday’s massive tax cut proposal, no one anymore can accuse George W. Bush of playing it safe.

The sweeping plan--which dwarfs the size of the congressional Republican tax plan that President Clinton vetoed last summer--constitutes an ambitious bet that Bush can shore up the support from party loyalists he needs to nail down the GOP nomination without making himself vulnerable to Democratic attacks in the general election, if he gets that far.

To win that wager, Bush must change the dynamics of a debate that has turned away from Republicans as the booming economy has dimmed the demand for tax cuts.

Coming after months in which the Texas governor has moved toward the center on such issues as education and distanced himself from Republicans in Congress, the tax cut plan thrusts Bush back toward the forward edge of conservative thought. It may mark the first time Bush has accepted significantly more political risk in the general election to reduce risk in the primary.

“This is the first evidence we’ve seen that George Bush is running a primary campaign,” said a senior strategist to one of Bush’s competitors. “This is the first policy proposal that is targeted at Republican primary voters, not a general election audience.”

Characteristically, Bush is trying to change the terms of the tax debate by focusing more of the plan’s benefits on working poor families than Republicans usually do--and by notably omitting any reduction in taxes on capital gains or corporations.

“This is going to be an interesting part of the election, to what extent will I be able to convince the single mom with kids at $22,000 that I mean what I say when I recognize that it’s incredibly difficult for her . . . to make it to the middle class,” Bush said in an interview Wednesday night.

But the plan’s sharp cut in the top tax rate for wealthy families, and its formidable overall price tag--estimated at $1.1 trillion to $1.3 trillion or more over the next decade--instantly inspired Democratic charges that it would favor the rich, consume funds needed for Medicare and Social Security and endanger the economy by plunging the federal budget back into deficit.

Those attacks--which reprise the arguments President Clinton has used to beat back three Republican tax cut proposals in the last four years--signaled the plan’s potential to sharpen the ideological contrast in the general election if Bush wins the nomination. Indeed, the proposal guarantees that if Bush is the nominee, voters will face a stark choice about the role of government and the use of the expected federal budget surplus.

While Democratic contenders Al Gore and Bill Bradley would devote the vast majority of the surplus to spending in areas like Medicare, education and health care, Bush would devote the overwhelming share toward tax cuts.

“A government with unlimited funds soon becomes a government of unlimited reach,” Bush declared Wednesday while releasing his plan in Des Moines.

Bush’s most conservative rivals for the nomination, Steve Forbes and Gary Bauer, quickly denounced his proposal as insufficient. Both have proposed to scrap the progressive income tax in favor of a new system that would eliminate most deductions and tax all income at a single rate.

In the interview, Bush said he rejected a flat tax on grounds of both policy--he supports deductions at least for mortgage payments and charitable contributions--and practicality. “I believe this is more realistic,” he said. “I know a president has only got a certain amount of capital and . . . I want to get elected on an agenda that can get enacted.”

Bush Would Cut Rates More Than Dole’s 15%

The sweep of Bush’s plan may make a conservative critique hard to sustain. The plan that congressional Republicans passed last summer would have reduced the tax rates in every bracket by only a single percentage point. Bush would cut the top rate, for the highest earners, by fully 6.6 percentage points--from 39.6% to 33%. He would cut the bottom rate from 15% to 10%, and reduce the middle rates by as much as six points.

In percentage terms, then, Bush would cut tax rates by even more than the 15% across-the-board reduction proposed by presidential nominee Bob Dole in 1996. Bush also reached out to social conservatives by proposing to double (from $500 to $1,000) the tax credit for children, and embraced other top GOP priorities by moving to abolish the inheritance tax and offset the quirk in the tax code that can increase taxes on married couples.

Steve Moore, the director of fiscal studies at the libertarian Cato Institute, said that although he was disappointed the plan did not move toward a flat tax, it represented a more ambitious tax-cutting agenda than he expected.

“There is a Reaganesque element to this plan,” he said. “It is much more like [Ronald] Reagan than it is like George Bush Sr.”

Yet Bush’s very success at responding to conservative priorities may create the plan’s greatest vulnerabilities, both in the primaries and general election. Aides to Sen. John McCain of Arizona, Bush’s closest rival, questioned Wednesday how Bush could afford such a large tax cut and increase defense spending, as he has also promised, without endangering programs for elderly Americans.

“In order to put to rest concerns about threats to Social Security or Medicare, Gov. Bush ought to outline the same kind of specific spending cuts that Sen. McCain has,” said Dan Schnur, McCain’s communications director.

McCain has proposed to apply about three-fourths of the expected $1-trillion federal operating budget surplus over the next decade toward Social Security and Medicare.

The McCain campaign’s shot across Bush’s bow was only an overture for what the governor would likely face in the general election if he wins the nomination. Over this decade, the debate between the parties about taxes has settled into a familiar pattern.

In the 1995 budget fight, the 1996 Dole campaign and again this year, Republicans have offered sweeping tax cuts as the centerpiece of their domestic agenda. Each time, Clinton has won the high ground politically with his interlocked arguments about cost, the distribution of benefits and the potential impact on programs like Medicare and Social Security. Advisors to Gore believe Bush has exposed himself to those same arrows.

But Karl Rove, Bush’s chief campaign strategist, said the governor’s camp believed that “this plan pushes the debate in a different direction” in two distinct respects. For one, Bush would move aggressively to cut the taxes of working poor families. Through the steep reduction in the lowest tax rate and the increase in the child tax credit, Bush aides say their plan would eliminate federal income taxes for a family of four earning $35,000 or less and for one in five families with children overall.

Secondly, Rove said, Bush will respond to charges of endangering other programs by emphasizing his record in Texas, where he balanced new spending with tax cuts.

Bush advisors also argue that his plan’s cost is minuscule compared with the nearly $24 trillion in revenue the government expects to collect in the 10 years after it would go into effect.

Bush added a fourth, practical difference with earlier debates: If elected he would use the presidential podium to push, rather than resist, a broad-based tax cut as Clinton has done.

Likely to Face Fierce Counter-Arguments

Yet Bush is bound to face fierce counter-arguments that could prove crucial in a general election.

Disputing the campaign’s claims, Robert McIntyre, director of the left-leaning Citizens for Tax Justice, released an analysis Wednesday concluding that Bush’s plan would cost $1.7 trillion over 10 years and shower just over half of its benefits on the top 5% of families, those earning $124,000 or more.

Probably even more important than these arguments about equity will be debates over priorities. Echoing other surveys, a Times poll earlier this month found that 80% of registered voters nationwide would prefer to use most of the budget surplus for Medicare, Social Security and education, while only 15% would prefer to devote it to a large tax cut.

By making the case early and often for tax reductions, Bush believes he can change that sentiment. Yet even other GOP strategists acknowledge that with voters feeling financially more secure--and hesitant about any bold policy departures that might endanger the surging economy--Bush faces a tough climate in which to build support for big tax reductions.

“I think it is going to be difficult,” said Tony Fabrizio, the pollster for Dole’s 1996 campaign, “to make taxes the singular defining issue.”