04-01-2000
TAXES: Bush And Gore's Positions On Taxes
In this era of federal surpluses, how much-not whether-to cut taxes will
be the key question in the presidential campaign. Many Republicans who
supported the presidential bid of Sen. John McCain, R-Ariz., said in polls
that they would rather pay down the national debt than receive a tax cut
as large as the one proposed by George W. Bush-some $483 billion over five
years. Democrats, including Al Gore, have seized on those sentiments. Gore
has said a five-year tax cut should be in the $250 billion to $300 billion
range, which interestingly is still a little more than the $223 billion
plan that McCain had pushed.
Bush and Gore contend their tax cuts would help middle-income working
people. But Bush favors a more broad-based tax cut, while Gore backs
targeted tax cuts similar to those proposed by President Clinton. The
candidates do agree, however, that married couples need relief from the
tax code's so-called marriage penalty.
Bush has said that under his plan, a family of four earning $35,000 a year
would receive a 100 percent income tax cut. If that same family of four
were earning $50,000 a year, they would receive a 50 percent tax cut, and
if they were earning $75,000 a year, they would receive a 25 percent tax
cut. "My tax cut plan is not just about productivity, it is about
people," Bush said in an outline of his proposals. "My plan sets
out to make life better for average men, women, and
children."
Bush proposes slashing the 15 percent tax bracket to 10 percent for the
first $6,000 of income that is taxable for singles, the first $10,000 for
single parents, and the first $12,000 for married couples. He also
proposes doubling the child tax credit to $1,000. Bush wants to cut the
marginal tax rate-the percentage of income paid-for middle-class taxpayers
from 28 percent to 15 percent and from 31 percent to 25 percent. For
marriage penalty relief, Bush proposes restoring the 10 percent deduction
for two-earner families so that they could deduct up to $3,000 more than
currently permitted.
Bush wants to allow taxpayers who do not itemize to be able to take a
deduction for charitable contributions and to increase the cap on
corporate giving. He would raise the annual limit on what families could
contribute to tax-free education savings accounts from $500 per year, per
child to $5,000. At the same time, he would repeal the Social Security
earnings limit, under which seniors ages 65 to 69 who make above $17,000 a
year lose $1 in benefits for every $3 earned. (Clinton is expected to soon
beat Bush to the punch by signing recently passed legislation that would
do the same thing.) Bush would also abolish the estate tax.
For business, Bush would make the research and development tax credit
permanent, and would cap the top marginal tax rate at 33 percent, down
from the current 39.6 percent.
Defenders of Bush's approach say that without a large tax cut, the federal
surplus would stay in Washington, where pressure would grow to spend it on
new and existing programs. They also emphasize that the plan would lower
taxes for all Americans. "This plan helps those Americans with lower
incomes the most," declared Grover Norquist, the president of
Americans for Tax Reform.
By contrast, Gore offers a more targeted approach. "My point today is
a simple one: America can have tax cuts that reflect our values and
strengthen hardworking families," he said in a speech last
year.
While Republicans continue to blast Gore for breaking a tie Senate vote on
the 1993 budget, which included a 4.3- cents-per-gallon gas tax increase
and other tax hikes, Gore touts that vote as helping low-income taxpayers
by expanding the earned income tax credit. His campaign platform calls for
increasing the amount of income a married couple can earn and still
qualify for the full EITC benefit.
Moreover, Gore wants to provide "wealth creation and retirement
savings among low-middle-income families," according to a summary of
his plan. He has said that tax-free universal savings accounts-voluntary
retirement contributions that the government would match-would provide
access to savings for 70 million to 80 million people who do not have
individual retirement accounts or 401(k)s. Clinton has proposed a similar
plan.
In addition, the Gore tax cut plan calls for a 401(j) lifelong earning
account. Families, including grandparents, and employers would be able to
contribute up to $2,500 a year, and earnings could be withdrawn and used
tax-free for education expenses or other costs related to "lifelong
learning." Currently, only people up to the age of 30 can use
education IRAs, but Gore's plan would allow those over 30 to use the
accounts if they need to acquire new skills for their careers.
Gore has called for marriage penalty relief by raising the standard
deduction, so that a married couple would have the same deduction as if
they were single. For corporations, Gore would make the research and
development tax credit permanent.
Defenders of Gore's plan say that it prudently leaves a cushion in case
budget surpluses are not as large as expected. "Our message of paying
down the debt and concentrating first on Social Security and Medicare
played extremely well with those moderate-to-conservative voters that Gov.
Bush is going to have to target," said an aide to a moderate House
Democrat.
Amid the rhetoric over who has the better tax cut, polling experts say
that the public may not be craving a tax cut, because of the strong
economy. "If you ask people about what's important to them in this
election, tax cuts come far down the list," said Karlyn H. Bowman, a
resident fellow of the American Enterprise Institute for Public Policy
Research who specializes in public opinion. "At a time when people
are feeling pretty good, as they are now, tax cuts have less
punch."
Bowman noted that in 1979, a time of slow growth and high inflation,
Gallup Organization asked people whether the government should cut taxes
even if it meant putting off things that needed to be done, and 62 percent
said they still favored tax cuts. When Gallup asked the same question
recently, only 21 percent said they favored tax cuts.
On the Stump
Bush
Greater Des Moines (Iowa) Chamber of Commerce, Dec. 1, 1999
I do not accept the assumption that it is somehow risky to let taxpayers
keep more of their own money. What is risky is when politicians are given
charge of a surplus. There is a strong temptation to spend it. And, in
Washington, that temptation is overwhelming. A government with unlimited
funds soon becomes a government of unlimited reach. There are only two
things that can be done with a surplus. It can be used by the government,
as the President proposes. Or it can be used by Americans, to save and
build and invest. As you can see from this tax plan, I have made my
choice. I choose the creation of wealth over the care and feeding of
government. I am always amazed when I hear politicians say government
cannot afford a tax cut. May I remind them that the government does not
pay for anything: The people pay for government. The question is not how
much government can afford to give to taxpayers. The question is how much
the taxpayers can afford to give to government. Low tax rates are a
powerful economic tool to promote a higher standard of living for all
Americans.
Gore
Minnesota Community Technical College, Minneapolis, July 30, 1999
I believe tax cuts should be carefully targeted to the hard-working,
middle-class families that need them the most. And today, I want to
propose a number of ways to do just that. To begin with, we need tax cuts
that are targeted to keep the economy growing and increase our
productivity. That is why I have proposed to extend and expand tax cuts
for research and development-so the private sector can invest in the jobs
and discoveries of the future. And I believe we should craft these tax
cuts specifically to help the small businesses and start-ups that are so
crucial to our high-tech future. Then we should cut taxes to help families
meet their most pressing needs. Already, we help people save for
retirement tax-free, and help them pay the interest on their mortgage
tax-free. Now we should cut taxes to help with some of the most important
expenses families face-health care and education. We need targeted tax
cuts to make health care more affordable for families. Right now, I am
fighting for a tax credit to help with the costs of long-term care. But
that should be just the beginning. We need a broader strategy to expand
health care coverage.
Position
Bush
* favors cutting tax brackets
* favors doubling the child care tax credit
* favors cutting the marginal rate for the middle class
Gore
* favors creating lifelong earning accounts
* favors raising the standard deduction for married couples
* favors creating USA accounts to encourage savings
By the Numbers
Would you be more likely or less likely to vote for George W. Bush if you
heard he has pledged to cut taxes?
More likely 49%
Less likely 15
No difference 34
SOURCE: Pew Research Center, 3/19/00
Allies and Advisers
Bush
* Lawrence B. Lindsey, former governor, Federal Reserve System
* John B. Taylor, former member, Council of Economic Advisers
Gore
* Robert Rubin, former Secretary of the Treasury
* Elaine Kamarck, professor, Harvard University
* Laura D'Andrea Tyson, former chairwoman, Council of Economic
Advisers
David Baumann
National Journal