John Wagner writes about the race to deal with the Bush tax cuts … how far will YOU go?
Democratic tax plans vary at core
WHAT'S AT STAKE
Here are some examples of the impact on hypothetical families of a full repeal of the tax cuts President Bush signed into law in 2001 and 2003.
FAMILY VALUE OF TAX CUT
Married couple with two children earning $35,000 $1,897
Single person with no children earning $35,000 $350
Single parent with one child earning $50,000 $1,073
Married couple with three children earning $50,000 $2,271
Single person with no children earning $50,000 $669
Married couple with no children earning $125,000 $3,277
Married couple with two children earning $125,000 $4,094
Single person with no children earning $1 million $37,713
URBAN-BROOKINGS TAX POLICY CENTER
By JOHN WAGNER, Washington Correspondent
First in an occasional series of stories looking at issues that divide the Democratic presidential candidates.
On the campaign trail, Democrats running 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 toward the rich.
But beneath the shared rhetoric are fundamental differences. In essence, the White House hopefuls disagree over how far the rollback should go.
Two of the major candidates -- former Vermont Gov. Howard Dean and U.S. Rep. Richard Gephardt of Missouri -- would repeal all $1.7 trillion in relief Bush signed into law in 2001 and 2003. The money, Dean and Gephardt contend, could be better spent on health care and other priorities.
Four of their rivals argue that such a wholesale repeal would hurt the middle class -- a group whose interests the party has pledged to champion.
"I can't for the life of me understand why some Democrats want to raise taxes on the middle class. That's the last thing in the world they need," Sen. John Edwards of North Carolina said in a speech last week. "They need help. They don't need us to make their lives harder."
His view is shared by Sens. John Kerry of Massachusetts and Joe Lieberman of Connecticut, and by 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 are an expanded child tax credit, an easing of the "marriage penalty" and a new bottom rate that would save many Americans about $350 on their first level of income.
The Democrats, meanwhile, stand united behind scuttling other breaks pushed by Bush, including income-tax rate reductions for wealthier Americans and cuts in capital gains and dividends taxes.
The outcome of this tussle could affect both the general election -- Republicans are itching to portray the Democratic nominee as a tax-raising liberal -- and tens of millions of families across the country.
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 a $2,000 break for such families is hardly "typical" of the Bush measures.
"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 the Bush 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 altogether, the study found. For a couple with three children, the loss would climb 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.
An analysis by the Institute on Taxation and Economic Policy found that by the end of the decade, the taxes of the richest 1 percent of Americans would fall by 17 percent owing to the Bush tax cuts. The tax burden for the remaining 99 percent would drop by only 5 percent, the study said.
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 finance without the additional revenue.
Gephardt says 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 a campaign ad.
The widening U.S. deficit also enters the debate. Candidates differ over how much savings from tax rollbacks should be steered toward balancing the budget.
Of course, before any of the Democrats can do anything, they must get elected.
Analysts say it is certain that Republicans will try to use the Democrats' push for tax rollbacks against the party's nominee in the general election. The more of Bush's cuts the nominee wants to undo, the more he will have to defend.
A preview of what is to come is already on the airwaves in Iowa and New Hampshire, the first two nominating states. The Club for Growth, a conservative organization, is attacking Dean, viewed as the Democratic front-runner, in television spots that started airing this month. The ads allege that Dean's plans to raise taxes are worse than those of failed Democratic nominees George McGovern, Walter Mondale and Michael Dukakis.
"He's put a big bull's-eye on his chest," Stephen Moore, the organization's president, said in an interview. "It's hard to comprehend how he could be elected with this tax plan."
Bush's initiatives delivered "a big tax cut for rich people," Moore said, "but it was also a big tax cut for middle-income people." For many families, he said, the savings is the equivalent of "two more mortgage payments a year. It's not inconsequential."
Jenny Backus, a Democratic consultant, said she is certain the attacks will continue. But she said Democrats "can beat back attacks on taxes if they don't let Republicans make it a values issue."
In the past, Republicans have succeeded in tagging those who want to increase taxes as "liberal" or "unelectable," Backus said.
What Democrats need to do this election, she said, is "frame the issue as a larger picture: Do people feel better off today? The bottom line is not taxes but whether voters feel better off economically."
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