Reprinted from The Washington Times , 5am -- April 15, 1998
TOP POLITICAL STORY
Tax-cut issue splits GOP, unites Democrats
By Donald Lambro
THE WASHINGTON TIMES
Republicans are headed into the 1998 congressional elections with a healthy economy and the first balanced budget in 29 years, but they remain politically divided over their biggest vote-getting issue: tax cuts.
After riding the tax-cut issue to victory in 1994 when they won control of the House and Senate for the first time in 40 years, and enacting family tax cuts into law last year, GOP leaders cannot decide on their next tax-cut offensive. There is no consensus on a second tax-cut bill that leaders have promised this year, and even less agreement on long-term proposals to overhaul the tax code or reform the Social Security payroll tax system.
"Our guys cannot agree on the size of the tax cut or what should be in it. They're all over the lot. There's not a single idea to rally behind," a Senate GOP official complained.
"Right now the party's leadership is ambivalent on tax cuts. They are unsure about which individual reform to push and skittish about pushing the entire tax-cut agenda," said Bill Dal Col, chief strategist for 1996 GOP presidential candidate Steve Forbes.
"You find more enthusiasm in the freshman and sophomore ranks. But in the leadership ranks they seem to be dispersed, extremely cautious and gun shy about what the administration's response might be and our ability to communicate our position to the electorate at large," Mr. Dal Col said.
The Democrats, however, seem more united on their tax and budget agenda, largely because they are pushing new spending initiatives and tax reform and simplification rather than tax reduction. "The fact is that Democrats are not for tax cuts," Rep. Rosa DeLauro of Connecticut, the Democrats' chief deputy whip, said in a House speech last month.
Democrats have rallied around the $150 billion in new spending President Clinton proposed in this year's budget for schools, child care, health care, the environment and other social welfare programs that form the nucleus of their campaign strategy.
But Democratic pollster Celinda Lake warns that the lack of a clear, high-visibility agenda could hurt the Democrats this fall when they go up against GOP candidates who individually will be stressing the tax-cut issue over more spending.
"The GOP has a wedge issue [taxes] and a clarity to the tax agenda that could give them a significant advantage in reaching and mobilizing their base. In contrast, the Democrats will have a difficult time turning out their voters without a clear agenda of their own," Miss Lake said.
Meanwhile, with their party split on tax cuts, Republicans seem to be running on last year's tax cuts. GOP leaders are betting that grateful voters this fall will give their party credit for enacting the first tax cuts in 16 years -- including lower capital gains rates, expanded IRAs, college tuition tax credits and a $400-per-child tax credit that will slice nearly $900 off the typical family's 1998 tax bill -- and that will keep them in control of Congress for another two years.
After a rocky start in 1995-96, the GOP Congress is winning its best job-approval ratings in nearly a decade: 57 percent, according to a recent Wall Street Journal poll. And voters credit Republicans over President Clinton and the Democrats, 45-30 percent, for "holding the line on taxes," according to a joint survey by GOP pollster Ed Goeas and Miss Lake.
But despite tax revenue surpluses that may reach $80 billion this year -- and could total nearly $1 trillion over the next 10 years --the more ambitious goal of cutting tax rates and reforming the income tax system no longer seems to be a high-visibility priority in the GOP's campaign agenda.
A Senate Republican official worries that his party "may be just coasting toward the election." And some national GOP leaders fear that they risk disappointing and alienating their grass-roots base if they do not take a more aggressive posture on tax cuts.
"If congressional Republicans abandon tax cuts and tax simplification, the American people will abandon them," Mr. Forbes told GOP leaders in a memo last month.
Other strategists say the Republicans' inability to pull behind a unified tax-cut agenda this year reflects its narrow majority margins in the House and Senate. "Our appetites and goals are way ahead of our political power," says Grover Norquist, president of Americans for Tax Reform.
House Speaker Newt Gingrich decreed earlier this year that his party would enact another smaller tax-cut bill before facing the voters this fall. But with less than seven months before Election Day, there is still no clear party consensus on what those tax cuts might be.
Moreover, there seems to be little likelihood of bigger tax cuts, either. The Senate budget bill provides only $6 billion a year for tax reduction. That leaves little room for GOP tax cuts of any significance, such as repealing the so-called marriage penalty.
That has sparked anger and resentment among the party's chief tax-cutters and many of its grass-roots forces who form the base of the party.
"After all those years we fought in the trenches against misguided efforts to reduce the deficit by raising taxes, I am saddened that our party may now go down the road of keeping taxes higher than they need to be," Jack Kemp said in a private letter to Speaker Newt Gingrich.
"I hate to say it, but many of our Republican colleagues are hiding behind a 'wait-and-see' posture [on tax cuts] while at the same time pushing to get their favorite new spending programs" enacted, Mr. Kemp said.
"Tax reform, the flat tax, that is pretty much off our radar screen for now. There may be a small tax cut passed but nothing significant. The plan is to get the budget bills passed, vote on several wedge issues, and go home early to campaign," said a Senate GOP official.
"It's just not high on the agenda right now and the reason is the economy. Unemployment is low. There's a sense of good economic feeling in the country," said Rich Galen, executive director of GOPAC, a GOP campaign finance group.
However, Republican officials and campaign strategists maintained that the issue is still one that plays strongly with voters and is going to be used aggressively by individual GOP candidates in this year's House and Senate races.
"Lower taxes and tax reform, we believe, will be dominant issues in the fall campaign," said Mary Crawford, chief spokeswoman at the National Republican Congressional Committee.
"We don't think that there is going to be a nationalized election as there was last year," when Virginia Gov. James S. Gilmore III swept to victory with his pledge to repeal the personal property tax on automobiles, and in 1994, when tax cuts were at the center of the GOP's "Contract With America," Mrs. Crawford said.
"Nevertheless, tax cuts and tax reform continue to be important to voters out there and continue to offer a stark contrast between Republicans and Democrats," she said.
"What we have done on tax cuts will market itself on April 15 when Americans file their tax returns. Our members will be talking a lot about it during the April recess and throughout this summer and fall," she said.
But GOP critics of the leadership's inertia on election-year tax cuts say that they risk demoralizing their party's base if they do not pursue a more aggressive legislative strategy this year.
Two major tax proposals illustrate Republicans' continuing division over how far they can go in an election year.
The first is a bill to "sunset" the tax code by January 2001, an idea pushed by Mr. Forbes and by the party's younger members in Congress to force action on full-scale tax reform. But after the president and administration officials attacked the plan last month as "irresponsible," warning that it would create uncertainty in the economy, GOP leaders seem to have backed away from it.
Senate Majority Leader Trent Lott may now only bring up a non-binding "sense of the Senate" resolution, and its status remains uncertain.
The second is a Social Security overhaul that would let the nation's 130 million workers invest a portion of their payroll taxes in their own personal investment plans as part of an overall reform effort to keep the program solvent.
While Republican leaders have given this idea rhetorical support, Democratic Sens. Daniel Patrick Moynihan of New York and Bob Kerrey of Nebraska have been among the first senators to introduce legislation to let Americans put 2 percent of the payroll tax into their own stock or bond funds, and have been aggressively promoting the idea.
"This would give workers an $800 billion tax cut over the next 10 years," Mr. Moynihan said. "We're talking real money here."
Senate GOP leaders, however, have been playing catch-up. Sen. William V. Roth Jr. of Delaware, the Finance Committee chairman, is drafting his own plan and will hold hearings in May, though Mr. Lott has not given his specific support to any privatization plan as yet.
In the House, Mr. Gingrich and his deputies have been cautious, calling for a commission to further study the issue and a plan to use the budget surpluses to let workers set up individual investment plans, separate from the Social Security system.
"We have to be very careful about advancing this," said GOP pollster Linda DiVall, who recalled that the last time Republicans voted to cut cost-of-living raises on Social Security in 1982, "we lost control of the Senate and 26 seats in the House."
Most Republicans are similarly nervous about touching Social Security without further evidence of stronger public support, despite Mr. Moynihan's political credibility with senior citizens.
Mr. Norquist, a close adviser to Mr. Gingrich, acknowledges GOP division over tax-cut policy but argues that "what's important is that everyone in the party will be talking about tax cuts in this election."
But grass-roots activists say the GOP must do something more than talk about tax cuts. "The Republican leadership's defensiveness on tax cuts puts them at risk of losing the ballgame in this election cycle," warns Lou Uhler, head of the National Tax Limitation Committee.
The Democrats, on the other hand, are stressing tax reform in their campaign agenda this year. Miss Lake's polling found that "reforming taxes is a stronger idea than cutting them and that Democrats should not cede that terrain."
After receiving Mr. Clinton's endorsement, Democrats are pushing the IRS reform bill that won overwhelming approval last year in the House and will be taken up this year in the Senate.
Other tax measures in their agenda include a pension reform plan that would make pensions more available to lower-income workers and more portable, and reforming the IRS code to "simplify the code and make it easier to comprehend and and comply with."
House Democratic Leader Richard A. Gephardt introduced a tax-reform bill this month that would eliminate the marriage penalty for two-income couples and broaden the 10 percent tax bracket so that a family of four "would pay no more than a 10 percent rate on income up to $61,000."
But critics of his tax-cut bill complain that it would also broaden the tax base by getting rid of a number of tax breaks, raising business taxes by $50 billion.
- Chief political correspondent Donald Lambro will be tracking tax and spending issues on the campaign trail through the 1998 election cycle. He can be reached by e-mail (lambro@twtmail.com).
Copyright 1998 News World Communications, Inc.
Reprinted with permission of
The Washington Times.
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