Democratic presidential candidates differ on tax cuts

Author: John Wagner

Published: December 14, 2003

WASHINGTON - On the campaign trail, Democrats gunning for the White House all sound a similar rallying cry: They want to "roll back" President Bush's tax cuts, which they deride as irresponsible and tilted too heavily toward the rich.

Beneath the shared rhetoric, however, lies a fundamental policy difference that is dividing the Democrats. In essence, their White House hopefuls disagree over how far to go.

Two of the major candidates - former Vermont Gov. Howard Dean and Rep. Richard Gephardt of Missouri - would repeal all $1.7 trillion in relief signed into law by Bush in 2001 and 2003. The money, Dean and Gephardt contend, could be better spent on health care and other priorities.

Four of their rivals, however, argue that a wholesale repeal would hurt the middle-class - a group whose interests the party has pledged to champion.

"That's not fair," said Sen. Joe Lieberman of Connecticut. "The middle class is stressed today. They've got it up to here."

His views are shared by Sen. John Kerry of Massachusetts, Sen. John Edwards of North Carolina and retired Army Gen. Wesley Clark of Arkansas, all of whom favor paring Bush's tax packages more selectively.

Among the breaks those candidates would keep: an expanded child tax credit, an easing of the so-called "marriage penalty" and a new bottom rate that saves many Americans about $350 on their first level of income.

"These provisions for middle-class working families are things that we Democrats fought for," Edwards said.

The outcome of this tussle could have ramifications for both the general election - Republicans are itching to portray the Democratic nominee as a tax-raising liberal - and for tens of millions of families across America.

In Democratic debates, Edwards, Kerry and Lieberman have argued that the effect of their rivals' plans would be to raise taxes on a "typical" middle-class family by close to $2,000 a year. Dean has done his best to discredit the figure, suggesting that such a windfall is hardly "typical."

"I'm not going to raise taxes," Dean said at one debate this fall. "We're just going to go back to the same taxes that Bill Clinton had, because I think most people in America would be glad to pay the taxes they paid when Bill Clinton was the president of the United States, if only they could have the economy they had when Bill Clinton was president of the United States."

An independent analysis by the Urban-Brookings Tax Policy Center, however, suggests that married couples with children could feel a pinch from a full rollback of Bush's tax cuts.

A couple with two children earning $35,000, for example, would lose $1,897 in tax relief if Bush's cuts were repealed wholesale, the study found. For a couple with three children, the loss climbs to $2,245.

The impact on single people would be far more muted because of the way the cuts were crafted. Someone making $35,000 with no dependents, for example, would lose only $350, according to the study.

Gephardt's and Dean's camps have tried to steer the discussion to other studies that show the disparity in relief between the wealthy and the less well off.

One analysis by the Institute on Taxation and Economic Policy found that by the end of the decade, the taxes of the 1 percent best-off Americans would fall by 17 percent because of the Bush tax cuts. The tax burden for the remaining 99 percent of the population would drop by only 5 percent, the study said.

All the Democrats want to get rid of the cuts that benefit upper-income Americans. Those include lower rates for higher-income brackets, as well as reductions in the capital gains rate and the dividends tax.

Among the Democrats, Gephardt has an added incentive for pushing a wholesale repeal. He has proposed a costly health-care plan that would be impossible to fund without freeing up the additional revenue.

Gephardt contends his initiative, which offers companies large tax credits to help cover employees' insurance costs, would provide a far greater stimulus to the economy than Bush's tax cuts.

"As president, I'll get rid of the Bush tax cuts to guarantee health insurance for every American," Gephardt promises in one of his campaign ads.

Analysts say it's certain Republicans will try to use the Democrats' push for tax "rollbacks" against the party's nominee in the general election. The more the nominee wants to roll back, the more he will likely have to defend.