Caucuses 2004: Democrats quarrel over tax cuts

Author: Thomas Beaumont

Published: October 23, 2003

Elkader, Ia. -The Democrats running for president agree: The wealthiest Americans ought to be stripped of tax cuts enacted under President Bush.

How many other Americans should lose their tax cuts, however, is a matter of heated debate among the Democratic candidates.

North Carolina Sen. John Edwards and three other candidates are proposing to repeal only those tax cuts for the top income brackets, saying repealing the cuts for all incomes would raise taxes on the middle class.

Candidates proposing to repeal all of them, including former Vermont Gov. Howard Dean and Missouri Rep. Dick Gephardt, say the tax cuts have failed to spark the economy. They argue the cuts have cost middle-income earners more by shifting the burden to state and local taxes and forcing higher fees for services.

Edwards says repealing all the cuts would raise taxes by about $2,000 a year on a couple earning $40,000 a year, with two children.

"Dean is wrong about this," Edwards said Wednesday while campaigning in northeast Iowa. "For these kinds of families -middle-income families -we're talking about thousands of dollars."

Edwards is basing the figure on the child tax credit enacted this year, worth $500 per child for those who qualify. The rest of the $2,000 estimate is based on the rate cut for married joint filers earning $40,000, which Edwards cites as U.S. Treasury Department figures.

Dean has said that most families do not fit the profile Edwards is using and that most taxpayers received far less, if anything at all, when increases in state and local taxes are considered.

"What I'm saying is the average person who paid taxes in this country got less than $100; 60 percent got less than $400," Dean said in a recent interview. "That is not a middle-class tax cut when you consider what's happened to people's property taxes and college tuitions."

Dean bases his numbers on reports from the Tax Policy Center, a joint project by the Washington, D.C.-based Brookings Institution and Urban Institutes. Their report states that 60 percent of Americans got $325 or less from federal tax cuts in 2003.

"That doesn't even begin to look at the additional argument that, OK, you have $325 in the bank, but you have increased taxes, fees and tuitions," Dean policy adviser Jeremy Ben-Ami said Wednesday.

Democrat Dave Schultz of Manchester, who has not decided whom he will support in Iowa's precinct caucuses, said he has felt little benefit from the tax cuts. The caucuses launch the 2004 nominating season on Jan. 19.

Schultz was among about 40 Delaware County Democrats who attended a noon campaign event for Edwards in Manchester.

"I don't know that they've done enough to stimulate the economy. I don't feel like they've been a great benefit to me," said Schultz, a 52-year-old high school social studies teacher with two children at Iowa State University. "My kids' tuition keeps going up. So does room and board and every other fee they pay."

But Schultz is undecided whether to repeal all the tax cuts or just those for the wealthy.

Dean has proposed using the money from rolling back all the tax cuts to expand health insurance access to all Americans, fully fund education programs and balance the budget.

"This president took our tax money and gave it to his friends," Dean told about 150 Clayton County Democrats at an Elkader restaurant Wednesday. "What this country needs is a president who is going to stand up for all of us."

Gephardt has proposed spending the money largely on a broad program to provide health insurance access to all Americans.

Edwards would use the money from the partial rollback to pay for a more gradual program to increase access to health care and for other programs.

The issue goes to the heart of the debate over the direction of the Democratic Party, which is struggling with how to respond to the economy and the party's recent political defeats.

"Let's be Democrats," Gephardt said, defending the full repeal.

Massachusetts Sen. John Kerry, who supports repealing the cuts only for the top income brackets, responded, saying, "The Bush tax cut at the low end is the tax cut that we Democrats have always fought for and stood for."

But Dean criticizes Edwards and Kerry for using the $2,000 example because he said that most families don't fit that profile and that the Bush administration used the same scenario to promote the tax cut last summer.

"These guys are even using the Bush Treasury Department numbers to bolster their case," Dean said during a recent Des Moines forum. "One thing I'm not going to do is fudge numbers."

Edwards said repealing the tax cuts would not fix Dean's complaint that the tax burden is being shifted from the federal government.

"One of the things I've proposed is that we provide at least $50 billion to help state and local government so that tax burden shifting does not occur," Edwards said.