Taxes Take Center Stage as Republicans Debate

George W. Bush, picking up steam in recent polls, was the prime target of his Republican rivals Monday night in a wide-ranging but composed debate that began with a testy exchange about tax cuts.

The Texas governor was attacked from the left by Sen. John McCain of Arizona, who said his tax cut plan is too deep--and from the right by publisher Steve Forbes, who said Bush’s tax cut plan is not enough.

On other issues, from Clinton-bashing to relations with Cuba, airline hijacking and the need to improve conditions for military personnel, the candidates found much to agree on.

But with the Jan. 24 Iowa caucuses quickly approaching and the Feb. 1 New Hampshire GOP primary just eight days later, the candidates’ attempts to highlight their differences were given a sense of urgency.

Bush’s high profile in the debate came as polls showed McCain’s lead in New Hampshire polls has shrunk or disappeared. A recent Boston Herald poll of New Hampshire voters gave Bush 33% of the vote and McCain 32%.

In Michigan, which on Feb. 22 holds one of the early GOP primaries, a recent poll shows McCain trailing Bush, 50% to 25%.

Bush was put on the defensive with the first question from moderator Tim Russert of NBC News, who asked whether a new Forbes commercial is accurate in claiming that Bush broke a tax cut pledge made during his campaign for governor of Texas.

Bush rejected the charge, saying Texans have seen a reduction in their property taxes. “I am a tax-cutting person,” he insisted, adding later: “I cut taxes as the governor. That’s a fact.”

But Forbes seized the issue. “A pledge should not be used as a trinket to win elections,” he said. “That’s what makes Americans cynical about politics. Pledges are made and then they are broken.”

McCain to Detail Tax Proposal Today

Stepping into the battle over tax cuts, which has become a defining issue for the leading Republican candidates, McCain said his own proposal, which he will detail in a speech in New Hampshire today, will aim at lower- and middle-income Americans and preserve the surplus for shoring up Social Security and Medicare and paying off the national debt.

As he has in recent days, McCain also said Bush’s plan to cut $483 billion in tax revenues over five years directs too much of the benefit to the wealthy. McCain was asked about GOP complaints that he is suggesting “class warfare” within the Republican ranks.

“I have never engaged in class warfare,” McCain shot back. “I’m deeply concerned with a kind of class warfare going on now. It’s a growing gap between the haves and have-nots in America, and unfortunately it’s building along ethnic lines.”

“I’m not sure we need to give two-thirds of the tax cuts to the wealthiest in America,” McCain said. “I believe we must save Social Security and Medicare. We must pay down the debt.”

Bush countered that “my plan does both.” And, with Sen. Orrin G. Hatch expressing agreement, Bush argued that Washington politicians cannot be trusted with the projected federal budget surplus if it is not returned in tax cuts.

“It’s risky to leave a lot of unspent money in Washington,” Bush contended. “It’s going to be spent on big government.”

Hatch said that Bush “is making a very good point. You leave this money in Washington, I guarantee those guys will spend it. I guarantee it will be both Republicans and Democrats, although less Republicans, naturally.”

Forbes, who is competing with Bush for the vote of social conservatives, tried to press Bush into rigid stands on abortion. He asked Bush whether, if he wins the GOP nomination, he would make it a requirement for his vice presidential nominee to oppose abortion rights and, if he is elected president, whether he would require the same of his Supreme Court judges.

A Vice President ‘Who Likes Me’

Bush said that, although he would work to keep the GOP a “pro-life” party, “I will have a vice president who can become a president. I will have a vice president who agrees with my policies,” he said. “I’m going to have a vice president who likes me. You may not like my answer, but that’s my answer.”

Candidate Alan L. Keyes, in one of the evening’s lighter moments, offered, “I like you, George.”

Earlier in the day, McCain’s staff released more details of the tax and spending plan he is scheduled to unveil in New Hampshire today. The new proposal elaborates on a tax blueprint the senator from Arizona initially released last summer and establishes a sharp contrast with Bush, the leader in the GOP race.

As he did last summer, McCain today will propose to devote about three-fourths of the anticipated $1 trillion projected federal budget surplus over the next decade toward Social Security, Medicare and paying down the national debt.

With the remaining surplus, and additional funds raised by closing corporate loopholes, McCain will propose cutting taxes by $240 billion over the next five years. That’s about half the size of the tax cut Bush has proposed. McCain argues that his plan is more fiscally conservative because it provides funds to stabilize Medicare and Social Security, whereas Bush would devote virtually all (or even more) of the surplus to a tax cut.

Although Bush has proposed an across-the-board cut in income tax rates, McCain offers no reduction in the highest rates and tries to target his tax breaks toward encouraging savings. The tax cuts McCain offered last summer centered on proposals to raise the standard deduction for married couples, and to cut taxes for middle-income families by taxing a higher level of income at the lowest 15% tax rate. He also proposed to significantly reduce the estate tax.

In the plan he’s releasing today, McCain will repeat those proposals and add several more, most of them geared toward encouraging savings. In a variation of the popular Individual Retirement Accounts, McCain will propose allowing middle-income married couples to invest $6,000 a year (and singles $3,000) tax free in savings accounts they can use for any purpose after investing the money for at least one year. He’s also proposing to increase to $15,000 (from $10,000) the amount that workers can invest in tax-free 401(k) retirement accounts, and to expand tax-free savings for medical and educational expenses. And he will call for excluding from taxation the first several hundred dollars earned in interest and dividend income.

In addition, McCain will call for doubling the children’s tax credit from $500 to $1,000 per child. Unlike Bush, who wants to make families earning up to $200,000 eligible for the credit, McCain will call for maintaining the current phase-out at $110,000 for married couples.

Times political writer Ronald Brownstein contributed to this story.