Bush joins GOP tax-cutting mainstream

Eschews flat tax, other radical reforms

By Curt Anderson, Associated Press, 12/01/99

WASHINGTON -- George W. Bush's five-year, $483 billion tax cut places the Republican presidential frontrunner firmly in the mainstream of GOP tax cutters -- far less aggressive than flat-tax acolytes such as Steve Forbes.


* Bush joins GOP tax-cutting mainstream
* Relief for poor, very rich
* How the major candidates stand on taxes


"You're going to get a big debate now: do you go with a flat tax approach or do you go with the tax cut approach?" said Stephen Moore of the libertarian Cato Institute think tank.

Democrats Al Gore and Bill Bradley, meanwhile, essentially continue President Clinton's approach of using more modest tax breaks to accomplish a social goal such as protecting land from suburban sprawl or lifting people out of poverty.

In a speech Wednesday in Des Moines, Iowa, Bush never mentioned the flat tax but did say his plan to use projected budget surpluses to gradually reduce income tax rates, abolish estate taxes, double the $500 per-child tax credit and enact other tax breaks is "realistic and responsible."

"For me, tax cutting is not some abstract cause," the Texas governor said in a state that holds the nation's first presidential caucus Jan. 24.

Bush focused on his plan's benefits for the working poor and middle class, saying half the cost of his income tax cuts will help people trying to work themselves out of poverty. He said 6 million people would no longer pay any income taxes, easing the burden on one in every five families with children.

"We will take down the tollgate on the road to the middle class," Bush said, adding that no middle class family would face a federal income tax rate higher than 25 percent.

Bush's proposal is much closer to the 10-year, $792 billion tax cut passed last summer by the GOP-led Congress -- and vetoed by Clinton -- than it is to Forbes' proposed 17 percent flat tax on all income above $36,000, elimination of capital gains taxes and abolishment of many loopholes and deductions.

Echoing Republicans on Capitol Hill, Bush promised his plan -- estimated by some analysts to cost $1.3 trillion over 10 years -- wouldn't siphon away money from Social Security and would act as a brake on runaway government spending of surpluses not set aside for the retirement program.

"I do not accept the proposition that it is somehow 'risky' to let taxpayers keep more of their own money," Bush said, answering criticism from Gore. "What is risky is when politicians are given charge of a surplus. There is a strong temptation to spend it."

GOP candidate John McCain has proposed raising the amount of income that is taxed at the lowest rate, effectively cutting taxes for many middle-income individuals. The Arizona senator, however, wants to pay part of the cost by eliminating corporate loopholes and cutting pork-barrel spending.

Forbes and Gary Bauer are the two GOP candidates pushing hardest for a flat tax, as is Reform Party candidate Pat Buchanan. Forbes told reporters Wednesday that the Bush plan demonstrates a "stark contrast" between two Republican tax relief philosophies.

"He tinkers with the tax code," Forbes said.

"Governor Bush has blinked and the tax code won," Bauer added.

But in five years of GOP control on Capitol Hill, the flat tax has generated little but rhetoric. Republicans in concert with Clinton have enacted a raft of new credits, but the GOP has failed to win broader tax cuts.

Independent analysts say a key stumbling block against a flat tax is the possibility it would hand the wealthy a huge windfall with uncertain impact on government services and might raise taxes on the working poor.

"It's dead because it's a dumb idea," said Clint Stretch, director of tax and legislative affairs at the DeLoitte & Touche accounting firm. "The numbers just don't work."

Bush's plan, however, relies on future economic growth of 2.7 percent, higher than the 2.3 percent forecast by the nonpartisan Congressional Budget Office over each of the next five years.

Stretch said a commitment to large tax cuts could hinder future spending for government programs such as education and the military, particularly if the surplus doesn't materialize.

"Being a little bit off could make the shoes fit real tight," Stretch said.

Iris Lav, deputy director of the liberal Center for Budget and Policy Priorities, acknowledged that the Bush proposal would provide a "fair bit" of tax relief for the middle class.

But its biggest cost, she said, comes from reducing the top tax rates on the wealthy and abolishing the estate tax, which also helps those with high incomes. Meanwhile, government programs could be put at risk. "The cuts in services would be borne by the poor and the near-poor," Lav said.

Bush advisers, however, said the lower CBO surplus projection is out of date and that the plan could be reassessed if economic circumstances change.

"We're picking what we think is a long-run, sustainable growth rate," said Bush economic adviser Larry Lindsey.

Bradley and Gore have not proposed broad tax plans, using the tax code instead as a means of tackling other problems. Both want to expand the earned income tax credit for the working poor.

Gore has proposed tax credits for such issues as preserving the environment and wants to expand pensions. Bradley is advocating an expansion in the dependent care tax credit, but he did say Wednesday he might push for a broader tax cut if the economy soured.