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Jewish World Review Feb. 5, 2001 / 12 Shevat 5761

Morton Kondracke

Kondracke
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Dems move toward bush on taxes, but ...


http://www.jewishworldreview.com -- WITH Congressional Democrats shifting toward larger, across-the-board tax cuts, it ought to be easy for President Bush to strike a deal. But of course it won't be.

The Democrats haven't officially settled on their tax stance, but leaders are talking about cuts as large as $900 billion over 10 years and have virtually decided to jettison the word "targeted," convinced it's a political loser.

The Democrats' shift is closing the differences between their plan and Bush's $1.6 trillion across-the-board proposal, and Federal Reserve Chairman Alan Greenspan has given his blessing to a tax cut.

There's plenty left for Democrats and Republicans to fight about, though - and both sides seem to be itching for a battle before they settle down to serious negotiations.

For example, they differ not just on the size of cuts but especially on how they should be distributed. Democrats are leaning toward a proposal that would give all families a

yearly $600 tax cut, while Bush also wants to give tens of thousands of dollars back to upper-income taxpayers.

Besides being far apart on substance, both sides want a test of strength to show who's boss. If Bush wants to change Washington's partisan atmosphere, this is the place to start.

So far, Bush has won one argument. Democratic leaders are abandoning former Vice President Al Gore's campaign position - and theirs - that tax cuts ought to be "targeted" to the middle class and achieve specific policy goals.

"People hear the word 'targeted' and think everyone will get a cut but them," observed one Democratic leadership aide. "They think that, as a party, we oppose tax cuts."

The point was driven home in a poll unveiled last Monday at a House Democratic leadership retreat which showed that by margins of 12 to 22 points, voters prefer across-the-board cuts to targeted ones.

The poll of 1,200 voters was conducted jointly by two Democratic firms, Garin-Hart-Yang and the Mellman Group, represented at the retreat by pollsters Geoff Garin, Fred Yang and Mark Mellman.

Asked whether Democrats should "stand up to" or "go along with" a Bush tax cut of $1.9 trillion (Democrats add interest payments to Bush's cuts), voters were split, 36 to 36 percent. By 57 to 17 percent, they said Democrats should "stand up to" cuts that go 60 percent to the rich.

Respondents said they trust Democrats on taxes slightly more than Republicans, 41 to 39 percent, and favor Democratic priorities, such as education, Social Security and prescription drugs, over tax cuts by 10 to 20 percent.

However, when asked to choose between "reducing everyone's taxes" and "targeted cuts for college and health care," they voted for across-the-board cuts by 52 to 40 percent. And when asked to choose between "reduced rates for all" and rate reductions for the first $35,000 of income, across-the-board cuts were favored by 57 to 35 percent.

Democrats haven't entirely dropped the idea of targeted cuts, however. Senate Minority Leader Thomas Daschle (D-S.D.) introduced a package of targeted cuts as the new Congress convened.

They also are likely to reintroduce marriage penalty and estate tax relief legislation that's smaller than Republican proposals, as they did in the last Congress.

But, subject to agreement when House and Senate caucuses approve the strategy, Democrats are likely to make their lead proposal acceleration of Bush's plan to lower the current bottom rate of 15 percent to 10 percent for the first $12,000 of income.

During the election campaign, Bush favored phasing in the cut over six years, which would give all families just a $120 cut this year. Democrats are inclined to make it fully effective this year, giving all families $600 at a cost of $40 billion a year.

There also is discussion among Democrats about giving taxpayers an income-tax credit for the Social Security taxes they pay and helping taxpayers whose incomes rise above the level that makes them eligible for the earned income tax credit.

Besides moving to across-the-board cuts, Democrats have nearly doubled the price tag on the cuts they will consider -from $500 billion during the campaign to close to $900 billion, if the Congressional Budget Office comes in next week with a non-Social Security, non-Medicare budget surplus of $2.7 trillion.

Democrats want a third of the surplus to go to tax cuts, a third to new spending programs, and a third to pay down the federal debt.

Democrats charge that Bush wants to spend 85 percent of the surplus on tax cuts and, after spending increases, would return the nation to the deficit era. Bush aides say that's nonsense.

Both sides claim they've been vindicated by Greenspan -Republicans, from his endorsement of marginal rate cuts; and Democrats, from his cautions to protect the surplus. And so the fight goes on.

My guess is there'll be an agreement somewhere near Senate Finance Chairman Chuck Grassley's (R-Iowa) estimate of $1 trillion in cuts and a top rate lower than its present 39.6 percent but higher than Bush's proposed 33 percent. However, it will be awhile coming.



JWR contributor Morton Kondracke is executive editor of Roll Call, the newspaper of Capitol Hill. Send your comments by clicking here.

Up

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08/02/99: One campaign reform should pass: disclosure
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