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Campaigns Playing Fast and Loose With Facts and Numbers

It was amateur hour all around when President Bush’s reelection campaign released an ad last week accusing John F. Kerry of planning to raise taxes by $900 billion if he won the White House. The Bush campaign’s justification for the charge was specious. The Kerry campaign’s response was misleading. And the vast press corps covering the campaign almost entirely failed to illuminate the holes in each side’s arguments.

If this is what Americans can anticipate over the next eight months, it’s time to reach for the remote control.

Let’s start with the logic of the claim in the Bush ad that Kerry, within his first 100 days, will “raise taxes by at least $900 billion” to “pay for new government spending.”

In a conference call with reporters and campaign documents supporting the ad, Bush officials couldn’t point to any Kerry statement endorsing a $900-billion tax increase.

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Instead, Bush campaign manager Ken Mehlman argued that Kerry would have to raise taxes at least that much to pay for the spending he had promised while meeting his pledge to cut the federal deficit in half over his first four years.

In particular, Mehlman noted that a study conducted for Kerry projected the 10-year cost of the senator’s healthcare plan at about $900 billion. “He won’t increase the deficit, therefore he will have to pay for it somehow,” Mehlman argued.

The Bush campaign is correct that the analysis of Kerry’s healthcare plan done last year by Emory University professor Kenneth E. Thorpe estimated its 10-year cost at just under $900 billion.

But, as Democratic analysts noted, there’s no reason to assume that each dollar spent on healthcare will translate into a new dollar of taxes. By the Bush campaign’s reasoning, the president also must be planning massive tax increases, because he’s proposing big hikes in spending on defense and prescription drugs for seniors while also promising to halve the deficit over the next five years.

In fact, Bush expects to fund his initiatives and reduce the deficit without raising taxes, via economic growth and spending cuts in other areas.

Unlike Bush, Kerry has explicitly supported some tax increases. But he is also promising to cut spending and anticipating increases in revenue. As a result, Kerry aides insist they won’t need to fund every dollar of his new spending with an equivalent amount in new taxes.

Whoever wins in November may well find their expectations of higher revenues disappointed -- forcing tough choices they deny today. But based on the logic behind the Bush campaign ad, Kerry would be just as entitled to claim Bush is secretly planning huge tax increases or massive spending cuts.

Yet if the Bush research staff had looked just a bit harder, it could have found a much stronger justification for the assertion that the Massachusetts senator is anticipating tax increases in the $900-billion range.

As in Kerry’s own words.

Kerry has indicated repeatedly that he wants to rescind the reductions in income tax rates Bush won for families in the top two brackets, those earning $200,000 a year or more.

Repealing those tax cuts, along with related changes Bush engineered to increase the value of exemptions and deductions for those high-end earners, would increase federal revenue by about $400 billion over the next 10 years, calculates Peter Orszag, a Brookings Institution tax expert frequently consulted by Democrats.

Kerry also has said he will repeal the provision in the 2001 tax bill that completely eliminated the tax on estates, no matter how large. Kerry hasn’t specified exactly how he plans to tax estates. But the most common Democratic alternative -- retaining the tax for only the largest estates -- would raise about $150 billion over the next decade.

Kerry also has indicated he will rescind, for all upper-income taxpayers, the cuts in taxes on dividends and capital gains that Bush signed into law last year. Depending on details Kerry hasn’t yet revealed, that proposal will raise roughly $250 billion over the next decade, Orszag calculates.

Finally, Kerry also has proposed repealing provisions in the tax code that he says encourage companies to shift jobs overseas; that could raise at least another $10 billion a year. In all, then, the total tab for the tax hikes Kerry has discussed approaches $900 billion over the next decade.

None of this appeared in the Kerry campaign’s response to the Bush charge or the response ad Kerry rushed out Friday. Nor did it surface in most of the newspaper stories on the exchange.

So was Bush right for the wrong reason? Not exactly.

For one thing, Kerry also has proposed several personal and business tax cuts that would reduce the net effect of his tax increases. Key among them: a tax credit for manufacturers that add new employees; a subsidy for small businesses that provide health insurance for their workers (by itself, cutting taxes by an estimated $63 billion over the next decade); and a credit to subsidize college tuition (which could save taxpayers about $50 billion over a decade, Orszag says).

More important, while the Bush ad implies that Kerry’s proposals will hit all Americans, each tax increase the senator has proposed so far will only affect high-income families. “If you are in the 98% of Americans who make less than $200,000 a year, John Kerry will work to cut your taxes and will certainly not raise them,” says Sarah Bianchi, his policy director.

It’s reasonable for Bush to question whether Kerry can hold to that line while meeting his other promises on spending and the deficit. It’s just as reasonable for Kerry to question whether Bush can square his promises of lower taxes and smaller deficits.

That’s a debate worth having. But it will require a lot more precision and care than anyone involved displayed last week.

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Ronald Brownstein’s column appears every Monday. See current and past columns on The Times’ website at www.latimes.com/brownstein.


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