Democrats vow to roll back Bush tax cuts

Author: David Goldstein

Published: January 29, 2004

WASHINGTON - Democrats have rarely been able to escape the Republican brush that paints them as opponents of lower taxes. And with each of the Democratic White House hopefuls promising to junk all or part of President Bush's tax cuts, the GOP will wave that brush again this year.

But the federal debt is growing so large, spurred by those tax cuts, that Americans may be more willing to weigh the Democrats' arguments. Drives to raise taxes to meet critical needs in states such as Michigan and Virginia are getting a surprising amount of support, which may signal a turn in public sentiment on this always controversial issue.

The nonpartisan Congressional Budget office predicted this week that the federal budget deficit would soar to a record $477 billion this year, and that mounting new national debt over the next decade would approach $2 trillion.

In addition to the tax cuts, the lingering effects of recession and the costs of war have deepened the fiscal hole. Then, there are big-ticket expenses approved by the president and Congress: $400 billion over 10 years for a new Medicare drug benefit and $87 billion this year for occupying and rebuilding Iraq and Afghanistan.

Bush foreshadowed his campaign strategy on taxes in his State of the Union speech. When calling for Congress to make his tax cuts permanent, he said, "Unless you act, Americans face a tax increase."

The Democrats running for president are essentially unified in their condemnation of Bush's cut-taxes-and-spend-more policies.

"The bills he is racking up are on our children and grandchildren's tab," former Vermont Gov. Howard Dean said this week. "We owe it to them to put an end to this administration's fiscal recklessness."

Dean, Rep. Dennis Kucinich of Ohio and the Rev. Al Sharpton would repeal all of Bush's tax cuts, then develop tax benefits for lower- and middle-income families.

Sens. John Kerry of Massachusetts and Joseph Lieberman of Connecticut and retired Gen. Wesley Clark would repeal only those tax cuts that benefit people earning more than $200,000 a year. Those people accounted for 46 percent of all income tax receipts in 2003, according to the Tax Policy Center, a joint research arm of the Urban Institute and the Brookings Institution.

Sen. John Edwards of North Carolina would repeal the cuts for those earning more than $240,000 annually.

Edwards would also raise the capital gains tax. Lieberman would expand the earned income tax credit for low-income families, and Clark would free families earning up to $50,000 a year from having to file any tax returns at all.

All of the Democratic candidates would raise revenue by closing provisions that enable corporations and others to avoid paying taxes.

"Nobody wants to be accused of raising taxes," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that pushes fiscal restraint. "However, it's hard to bring in more revenue without raising taxes. Politically, it's easier to say we're going to raise taxes on the rich because most people don't consider themselves rich. So it appears to be a solution that doesn't affect most people."

But can Democrats run successfully on a platform that allows their opponents to legitimately accuse them of trying to eliminate tax cuts? Or as Republicans put it, "raise taxes?"

Michigan pollster Ed Sarpolus said this could be the year when the electorate is more receptive to a nuanced campaign on tax cuts. In Michigan, a presidential battleground state, he said residents strongly supported Democratic Gov. Jennifer Granholm's push to delay an annual state income tax reduction last year to avoid cuts in education and other programs. Republicans had decried it as a tax increase.

"We're beginning to see a mood change by the voters," Sarpolus said. "It's not that they want to see tax increases. The issue is they're willing to give up a tax cut if there is a need."

In Virginia, the Chamber of Commerce just endorsed Democratic Gov. Mark Warner's plan to raise taxes to meet needs in education and transportation. The Republican State Senate finance chairman called for raising taxes even more.

Critics might argue that Alabama's experience proves differently. Last summer, voters there rejected a plan by Republican Gov. Bob Riley to raise taxes to pay for a range of crucial state needs.

Still, a survey by the Pew Research Center for the People and the Press in mid-January showed that slightly more than half of the public believes that reducing the deficit should be a top concern of the president and Congress. That's more than 10 percent higher than when the same question was asked a year ago.

"Can Democrats get out of the old `tax and spend' labels?" said Pew pollster Carroll Doherty. "The deficit gives them more of a hook than they've ever had before."

Even if running against the deficit is a smart political strategy, the National Taxpayers Union, a conservative budget-watchdog group, said that Democratic plans don't accomplish what they advertise. A recent study by the group said spending would actually increase under each of their plans.

Republicans point to the economic upturn, which saw an 8.2 percent growth rate in the third quarter of last year, and contend that the president's tax cuts provided a stimulus.

"The American economy is growing stronger," Bush said in his State of the Union speech. "The tax relief you passed is working."

Conservative economist Daniel Mitchell, a senior fellow at the Heritage Foundation, dismissed the Democratic plans as "standard class warfare: Let's have higher taxes on the rich and get more low-income people off the tax rolls," he said sarcastically.

Democrats contend that the only people benefiting from tax cuts are the wealthy. Figures compiled by the Tax Policy Center show that people with annual incomes between $500,000 and $1 million saved nearly 5 percent of their incomes as a result of the 2001 and 2003 tax cuts. People earning between $20,000 and $30,000 annually saved less than 3 percent.

"The rate reductions are worth the most for people with very high income," said Leonard Burman, co-director of the center. "The rationale put forward by the administration was high-income people should get the biggest cuts because they pay the most. But you can see it's not proportional. Their tax cut as a share of their income is much larger than it is at the bottom. The net effect makes the tax system less progressive."

In addition, with the budget flip-flopping in just three years, from a surplus of $127 billion when Bush entered the White House to approaching a deficit of $500 billion in his fourth year, the Democrats see his tax cuts as a ripe political target.

"It has the potential to be a big issue for Democrats because most Americans are unhappy with the complexity of the code and the great shift in the burden of the Bush tax cuts," said Will Marshall, a founder of the centrist Democratic Leadership Council. "If the Democrats can't make this case, they probably ought to drop out."