Bush avoids serious tax talk with jokes, critics say

Author: Jon Kamman

Published: August 21, 2004

It's a line in his campaign speech that usually draws laughs, but supporters and critics alike say President Bush is distorting what should be a serious discussion of tax policy by dismissing his rival's call for higher taxes on the rich with a quip that "most rich people are able to avoid taxes."

Bush has made that or similar remarks in more than half of his stump speeches across 10 swing states this month.

Critics in a range from the conservative side of the political spectrum to backers of Democratic presidential nominee John Kerry say that although the wealthy use many legal techniques to minimize their taxes, Bush's broad-brush characterizations of tax avoidance are inappropriate and simply untrue.

"It's just something he made up himself," said Len Burman, senior fellow at the Urban Institute and co-director of the Tax Policy Center, operated jointly with the Brookings Institution.

"Rich people pay a lot of taxes, which is why they were so anxious to get tax cuts," he said. "The more coherent question is whether they're paying too much or too little."

The president does say in his campaign speeches that no one should be taxed at more than the current maximum of 35 percent, but often adds comments disparaging the rich.

Last week in Albuquerque, he used the line about "most rich" not paying. In Virginia, he said, "Real rich people figure out how to dodge taxes," and in Wisconsin, "The rich figure out ways not to pay, and you (the middle class) get stuck with the tab."

Logic questioned

For some observers, such exaggerated rhetoric is illogical coming from a president who has staked much of his bid for re-election on the across-the-board tax cuts he won in 2001, including those for the rich. Critics question why he believes the wealthy should have tax breaks if they're avoiding taxes anyway.

"That's where people start scratching their heads," said Raymond Keating, chief economist for the 70,000-member Small Business Survival Committee.

"There are two phenomena at work here," Keating said. "By raising taxes, do you create an incentive for people to try to avoid paying them? The answer is yes. At the same time, even with all their accountants, lawyers, insurance and everything else they can do, they (the rich) are still the ones paying the bulk of the taxes."

Burman said Internal Revenue Service statistics show that taxpayers in the top 1 percent for income pay more than one-third of all individual income taxes.

No mention in Phoenix

Bush has alluded to tax dodging by the rich in at least eight of 14 stump speeches this month but brought it up just once, in Albuquerque, while campaigning with Sen. John McCain at his side.

Addressing a crowd of 15,000 on McCain's home turf in Phoenix, he referred only to "well-timed tax relief" as an economic stimulus.

McCain, Bush's main rival for the Republican nomination in 2000, has been outspoken against tax cuts for high-income people. He was part of an unsuccessful effort in the Senate to scale them back and has co-sponsored, with Kerry, a measure to cut what they call "corporate welfare" and use the savings to reduce the budget deficit.

"I would hope that people would not come away with the impression that, 'Well, raise the rates or lower the rates, it's all the same; they (the rich) are going to do what they want,' " said Pete Sepp, vice president of the National Taxpayers Union, a citizens advocacy group.

Sepp said that if he was advising the president, "I would tell him that politicians need to re-establish their credibility on the tax-reform issue."

That would require thoughtfully debating the fairness of tax rates, eliminating the "truly creative and bizarre tax shelter schemes" that arise from an increasingly complex tax code, structuring taxes to reward success and strengthen the economy, and perhaps scrapping the current system in favor of a flat tax on all income or a national sales tax, Sepp said.

What Bush means

Bush campaign spokesman Danny Diaz said the president's remarks are a warning to the middle class that it, rather than the rich, likely would bear the cost of programs proposed by Kerry.

"What I believe the president is saying is that John Kerry has a $2 trillion spending plan, has promised to deliver tax relief to 98 percent of Americans, and promised to pay down the deficit in four or five years. You cannot possibly do all those things by raising taxes on the rich," Diaz said.

Kerry spokeswoman Sue Walitsky countered that Kerry's plan, which would tax individual incomes of $200,000 or more at the former maximum rate of 39.6 percent, would raise $860 billion, while other programs would be funded on a pay-as-you-go basis from shifts in spending and other revenue sources.

Kerry's plan would leave the middle class better off than it is under tax reductions already granted under Bush, Walitsky said. One large source of new revenue, about $12 billion a year, would come from the elimination of tax breaks on many of the profits U.S. corporations make from operations overseas, she said.

Tax analyst Burman said, "Raising (individual) tax rates beyond a certain point is probably counterproductive, but there's not any evidence that that point is 35 percent. We raised a lot of money when we had a top tax rate of 39.6 percent, and all of the official estimators concluded that lowering that rate to 35 percent cost a lot of revenue."

Bush's arguments about the benefits of tax cuts have been undermined by recent analyses by the politically neutral Congressional Budget Office and the nonpartisan Tax Policy Center. They concluded that the rich have been the main beneficiaries, at the expense of the middle class.

Small-business wealth

In several of his campaign appearances, Bush has championed small-business owners as the backbone of job creation and economic recovery and has emphasized that most pay taxes on company profits on their individual tax returns.

"The rich in America happen to be the small-business owners," Bush said recently, and they would bear much of the burden of Kerry's tax-the-rich plan.

"Let's get the facts right," Walitsky said. "Ninety-five percent of small-business owners will not be affected," although, she added, many with incomes above $200,000 would benefit from tax credits for creating jobs and providing health care coverage for workers.

Meanwhile, Bush's tax cuts give an average tax break of $136,000 to a family making more than $1 million, she said.

'Gravy train' ignored

Lost in the argument, observers agree, is the need to seriously address burgeoning budget deficits.

Burman said a new study projects that, despite major differences between Bush and Kerry's spending plans, they are both likely to add $1.2 trillion to the national debt in the next 10 years, a shortfall that future generations will have to make up.

This year, the deficit is expected to reach $445 billion, or an average of about $1,500 per person.

"Instead of trying to figure out a way to get on a solid financial footing now, when it's relatively easy, both of these guys obviously have made a political decision that saying, 'The gravy train is over' is not going to fly," Burman said.