GOP Wavers on Pursuing 10% Tax Cut

An attempt by some Republican congressional leaders to unify the party around a 10% across-the-board tax cut is meeting stiff resistance, with GOP dissidents pushing a more modest alternative.

The rift has caused the leaders to consider abandoning the broad tax-cut plan, once seen as a Reaganesque-type proposal that would return a chunk of burgeoning budget surpluses directly to taxpayers while helping shore up the GOP’s battered image.

Many in the GOP rank-and-file question the political wisdom of pushing a big tax cut that Democrats already have slammed as a sop to the rich. These dissidents, mostly moderates, are pushing alternatives that would provide the smaller tax cut--targeted to married couples and other constituencies--or use the surplus to reduce the national debt.

“I think it’s a terrible mistake for our party to make as our moniker a 10% across-the-board tax cut,” said Rep. Ray LaHood of Illinois, a moderate Republican who is among those urging that the plan be dropped. “We’re going to get trapped into this cultural debate about the rich versus the average person. Boy, I hate to see our party do that again.”

Exactly how the Republicans resolve this debate could affect whether any taxpayers end up with real relief. The dispute also looms as an early sign of problems the party could face with their message in the 2000 campaign.

GOP Schism Stirs Concern

Some Republicans said that the disagreement reflects a healthy difference of opinion resting on a solid consensus that some tax cut is needed. But others worry that the schism is symptomatic of broader GOP disarray, as the nation’s political agenda has slipped inexorably toward issues such as education and health care, where polls show President Clinton and the Democrats tend to dominate.

Part of the problem Republicans now face is the narrow margin of GOP control in the House. With a party breakdown of 223 Republicans, 211 Democrats and an independent who usually votes with the Democrats, the GOP can lose only six of its members on a party-line vote and win passage of a tax cut. At least 18 House Republicans are backing the more modest alternative to the 10% cut. That has forced advocates of the 10% tax cut to face a sobering reality.

“The chances to pass anything sweeping in this Congress are limited by the six-vote margin, and a 10% across the board tax cut is a sweeping proposal,” said Ed Gillespie, a political advisor to Rep. John R. Kasich of Ohio, a GOP presidential aspirant who is a leading advocate of the broad tax cut.

Also confronting that political reality is House Speaker J. Dennis Hastert (R-Ill.), who declined to offer any ringing endorsement of the idea when asked this weekend whether he wants across-the-board or targeted tax cuts.

And House Majority Leader Dick Armey (R-Texas), who supports the 10% tax cut, signaled Monday that it may not be in the cards this year.

“We’ve got a large number of Republicans with a large number of different ideas about how to best cut taxes,” Armey told reporters. The 10% tax cut plan, he said, is “not necessarily and clearly not the only idea.”

Budget Surplus Changes Landscape

The fiscal backdrop for the debate over tax cuts is a landscape of plenty. The budget surplus is growing bigger than anyone ever imagined--an estimated $2.56 trillion over the next 10 years.

Republicans have generally accepted Clinton’s proposal to set aside 62% of the budget surplus over the next 15 years for shoring up Social Security. They differ over what to do with the rest. Most Republicans want to use it for tax cuts. Clinton has proposed using it for bolstering Medicare and other spending initiatives.

“The president has gone through huge hoops to avoid leaving any money for tax cuts,” said Senate Budget Committee Chairman Pete V. Domenici (R-N.M.).

Still, some Republicans are encouraged that there is more room to negotiate than last year, when Clinton insisted that none of the surplus be used until Social Security is fixed for the baby boom generation’s retirement.

The debate’s political backdrop is not so encouraging for Republicans. For months, as the GOP’s identity became tightly linked to the impeachment drive against Clinton, the party’s approval ratings have plummeted. Democrats now have a huge advantage over Republicans in terms of public confidence in their handling of key issues.

“Clinton has usurped them on every other issue,” said Michael Johnson, a former House Republican leadership aide. “This one [tax cuts] is sacrosanct. This one, Republicans fall on their swords over.”

In a bid to spotlight the across-the-board tax cut, Republicans hit the road for about 150 town meetings around the country during last week’s congressional recess.

The idea has also been pushed hard by Kasich, chairman of the House Budget Committee. His proposal would provide about $743 billion in tax cuts over the next 10 years by reducing each of the five income tax rates by 10%.

Clinton and congressional Democrats have wasted no time criticizing the 10% tax cut for providing what they say is disproportionate benefits to the wealthy.

They cite a study by Congress’ Joint Committee on Taxation showing that families with incomes over $200,000 a year would get 32% of the benefits from the rate cut.

“If this is an ‘across-the-board’ tax cut, then the board must have a lot of knotholes in it,” said Rep. Charles B. Rangel (D-N.Y.).

That’s the kind of political battering that some Republican moderates do not like.

Rep. Nancy L. Johnson (R-Conn.) and 17 other moderate Republicans have introduced an alternative that is narrower and that they believe has a greater chance of passing.

The bill, modeled on the tax cut passed by the House last year, would provide $100 million in tax relief over the next five years. Its centerpiece would reduce the marriage penalty by doubling the standard deduction for married taxpayers.