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Bush Unveils $1.6-Trillion Proposal to Cut Taxes

TIMES STAFF WRITERS

President Bush opened his campaign for a 10-year, $1.6-trillion tax cut Saturday, making good on a campaign promise and setting the course for his first year in office.

If his tax cut proposal becomes law, its sheer size guarantees that it will cast a long shadow over the government’s spending decisions.

The largest part of Bush’s tax plan is an across-the-board rate cut that would reduce income taxes for all taxpayers. The tax cut would be “for everyone who pays taxes,” Bush said in his second radio address, emphasizing that whether someone works as a waitress or as a well-paid lawyer, they should get a piece of the government’s surplus.

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For the lowest bracket of taxpayers, the rate would fall from 15% to 10%; for the highest, from 39.5% to 33%. Bush said that for the average family his proposed rate reduction would mean a cut of $1,600 in their tax bill. (The White House did not respond to a question about how it defined the average family.)

Democrats served notice, however, that they would support tax cutting, but only so far.

The president said that he would press to trim the tax “penalty” paid by married couples and to end the estate tax. Beyond that, his tax cut proposal, which he will formally send to Congress on Thursday, will include an expansion in tax-deferred education savings accounts, an increase in the size of the tax credits for families with children and a permanent extension of the business tax credit for research and development.

While the public generally supports a tax cut, it is less clear that Americans are clamoring for a cut that is this large and that will likely limit the government’s capacity to pay for other programs and slow down the reduction in the federal debt.

It appears unlikely that the tax burden is a significant reason that some middle- and lower-income Americans might feel they have not shared in the country’s prosperity. According to the nonprofit Center on Budget and Policy Priorities, a research group that focuses on federal policy for poor and working families, government analyses show that the combined federal tax burden was lower in 1999 than it was in 1995 for families with incomes between $30,000 and $50,000 a year.

Those fault lines were quickly exploited by Democrats, who in their official response to Bush’s address made clear the outlines of the coming tax debate.

Senate Minority Leader Tom Daschle (D-S.D.) stressed that Democrats will back Bush’s tax cutting efforts but only up to a point. Their mantra will be that tax cuts should go to those who need them most and that the government should be mindful of the many other costly demands facing the country.

“Democrats agree with President Bush: The American people deserve a tax cut. We strongly support a major tax cut this year,” Daschle said.

But that doesn’t mean it should go sky-high, Daschle said. “The tax cut must be affordable--and responsible. It can’t use up money we need for education, prescription drugs and other necessities.”

Furthermore, Daschle said, “working families should come first.”

Bush is well aware that a tax cut should be pitched in terms of its benefits to middle- and lower-income taxpayers, and in his radio address he made a point of repeatedly evoking images of those who, in the booming 1990s, still feel left behind.

“The country has prospered mightily over the past 20 years. But a lot of people feel as if they have been looking through the window at somebody else’s party,” Bush said.

“It is time to fling those doors and windows open and invite everybody in.”

Nonetheless, he was straightforward about the fact that his tax plan would be a boon to the wealthy.

“Picture a dinner in one of our cities,” said Bush. “At the table is a lawyer with two children. She earns $250,000 a year. Carrying her coffee and toast is a waitress who has two children of her own. She earns $25,000 a year. . . . Both of these women deserve a tax cut.”

Bush is expected to devote much of the week to leading what a senior aide called “a full-throated argument” by the administration on behalf of the tax cut plan. He will be joined by Treasury Secretary Paul H. O’Neill and Commerce Secretary Don Evans.

Bush’s public roll-out of the proposal will culminate with the formal dispatch of his initiative to Congress. In between, he will have multiple opportunities to focus both the public and congressional lawmakers on the tax debate, beginning today with his visit to House Democrats at a retreat in Western Pennsylvania and continuing Monday with a White House event at which he will spotlight families who would benefit from his proposals.

A White House aide said the tax program’s details are likely to hew to those on which the president campaigned.

Indeed, Bush’s first two weeks in office sent two clear signals: He will focus relentlessly on fulfilling campaign promises to ensure that he is never vulnerable to the charge--leveled at his father--that he said one thing but did something else. President George Bush famously promised not to raise taxes but later signed legislation that did just that.

Taxes a Key Concern for Bush Voters

Tax cuts certainly mattered to Bush voters. In a Los Angeles Times Poll conducted on election day, 25% of those who voted for Bush said his position on taxes was the most influential factor in their vote; among all voters who said their choice for president was based on tax policies, 71% voted for Bush.

Bush’s approach to the tax debate also makes clear how large Congress looms in his calculus of the factors that are necessary for him to emerge as a leader. Unless he is able to persuade Congress to send him a tax bill that includes the core of his plan and at the same time restrains lawmakers from running up the legislation’s price tag by adding their favorite tax cuts, he will not be deemed a success.

To that end, he courted Congress over the last week and plans to continue to do so, both with his public pitch for his tax plan and in private through meetings with key lawmakers as the legislation takes shape.

“It will be a basis of judging how much power he has, and his ability not only to make nice with Congress but to get his way and address his top campaign promise,” said Andrew Kohut, director of the Pew Research Center for the People and the Press. “It will set the stage for how he will be judged over the next year.”

Kenneth M. Duberstein, who helped shepherd some of President Reagan’s key policies through Congress, agreed that winning passage of the tax cut is crucial for Bush. “We’ll find out how much of a heavyweight he is,” he said.

At stake for Bush is both his political future and his credibility as leader of the Republican Party. If he is unable to generate enough confidence from the public it will contribute to how House and Senate GOP lawmakers fare at the polls in 2002. With the Senate split 50-50 and the House with a five-vote Republican majority, Bush has little room for error.

The fate of Bush’s tax plan involves “huge congressional politics for holding the House and Senate” in 2002, said Richard N. Bond, a former chairman of the Republican National Committee. The last president who was able to pull together bipartisan support for a major tax cut was Ronald Reagan. But Reagan swept into office in 1980 with a commanding majority that signaled a clear mandate for his agenda. Bush, by contrast, came to the White House with not even a majority of the popular vote.


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