Bauer Tries to Underbid Forbes With 16% Flat Tax

Broadening his message beyond social issues, GOP presidential hopeful Gary Bauer unveiled on Thursday a sweeping tax reform proposal that would slash taxes on individuals and raise them on businesses.

In a speech at the National Press Club here, Bauer proposed a 16% “flat tax” on individuals and businesses, as well as a 20% reduction in Social Security payroll taxes. The plan’s most controversial element would fund tax cuts for individuals largely by eliminating deductions for business investments in plants and equipment.

“If businesses can write off the costs of machines, why can’t America’s families write off the cost of keeping body and soul together?” insisted Bauer, a veteran social conservative activist who has mounted a longshot bid for the GOP nomination.

Bauer repeatedly took aim at his principal rival on the GOP right: publisher Steve Forbes. Bauer portrayed his flat tax as fairer to average Americans than Forbes’ plan for a 17% flat tax.

Bauer charged that the Forbes plan provides business tax breaks so large that many corporations would avoid paying taxes altogether. “What do you think [Vice President] Al Gore and the attack team at the White House will do with an idea like that? They would destroy my party,” Bauer said.

Bill Dal Col, Forbes’ campaign manager, countered that his candidate’s plan would strengthen the GOP. “Creating jobs and expanding the economy promotes a party, it doesn’t destroy it,” Dal Col said.

Bauer’s plan would tax all individual income--including capital gains--at 16% and eliminate all deductions except those for charitable contributions and mortgage payments. It would replace existing personal deductions and exemptions with a tax credit of $1,400 per person--enough to eliminate all federal tax liability, including Social Security taxes, for a family earning about $20,000 a year. Businesses would also pay at a 16% rate--down from a top rate of 39%.

But the idea of eliminating write-offs drew immediate barbs from business groups. “His plan will kneecap small businesses and economic opportunities,” said Karen Kerrigan, chairwoman of a conservative grass-roots group, the Small Business Survival Committee.

Bauer denounced proposals endorsed by most other GOP contenders to partially privatize Social Security by allowing workers to divert part of their payroll tax into individual investment accounts.

Instead, Bauer proposed an immediate 20% cut in the payroll tax. While the plan would preserve Social Security benefits for current retirees, young workers retiring in the future could see benefits reduced by as much as 20%, he said.

Bauer said workers could invest money gained through the tax cut in private retirement accounts.