Thursday, January 18, 1996
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Rivals struggling for bragging rights of tax reform plan
The Associated Press
WASHINGTON — Eager to make bold tax reform a 1996 campaign centerpiece, most Republicans were quick to embrace the flat tax and the marketing charm of its postcard simplicity. But that support has cracked and could crumble because of brewing class warfare among GOP presidential hopefuls.
There is considerable irony to this: When it comes to mixing politics and economics, Republicans are usually quick to accuse Democrats of trying to pit the poor and middle class against the wealthy.
But for now, that is the theme of an internal GOP fight. The outcome will determine whether it is flat tax, or any specific tax
the flat tax, or reform proposal, will find its way into the 1996 GOP platform.
Senate Majority Leader Bob Dole warned that Republicans needed to make sure they didn't embrace a plan in which the middle class took it on the chin. Texas Sen. Phil Gramm cast himself as a blue-collar Republican, trying to distinguish himself from the blue-blooded
It also would not make individuals pay taxes on dividends, interest or capital gains.
In simpler terms, a wealthy individual who doesn't work but makes millions from investments would pay no income taxes, while a barber, factory worker or office receptionist would.
"I do not believe it is defensible," Gramm said Tuesday of that idea. He also said it was unfair to take the mortgage interest deduction away from the middle class.
Gramm has plenty of company within the GOP field. Front-runner Dole, former Tennessee Gov. Lamar Alexander and commentator Pat Buchanan all raise similar objections to the Forbes flat tax.
Yet even as they try to undermine Forbes and his plan, Dole, Gramm, Alexander and Buchanan are sold on the idea of promoting dramatic tax reform as a 1996 issue. In this regard, Gramm is ahead of the rest when it comes to details.
He proposes a modified flat tax
"there's nothing President Clinton would like more than Republicans to adopt the flat tax as part of their
1996 election strategy."
Republican who has made the flat tax the most contentious issue in the GOP presidential race.
Robert Dole
Senatemajorityleader
of 16 percent that preserves deductions for m o r t g a g e interest and charitable contributions. U n l i k e F o r b e s, Gramm said he would require individuals to pay taxes on capital gains and interest, an approach fairer to the middle class.
That would be millionaire publisher Steve Forbes, whose plan for a 17 percent flat tax would eliminate deductions for mortgage interest and gifts to charity.
A report is due from a commission named by Dole and H o u s e
Speaker Newt Gingrich and led by Jack Kemp. That report will recommend a single or flat rate without picking a figure, and discuss, without taking sides, the ups and downs of maintaining certain deductions.
"There are important social and economic consequences of
Income tax and flat tax compared
Five tax brackets*
How the income tax we use now compare proposed by some Republics:
INCOME TAX
28% $39,001-$94,250
31% $94,251-143,600
36% $143,601-$256,500
39.00% $256,501 and up
Taxable income
Salary, wages, pension, interest, dividends, capital gains, other income
Tax rate Income range
15% Up to $39,000
Exenipools Self, spouse, dependents
Other deductions
Mortgage interest, charitable donations, state and local taxes, other deductions
One tax bracket
17%**
Credit
Child care, elderly and disabled,
low-income wage earner, other
credits
Credits
Exemptions
Taxable income Salary, wages, pension
Large standard deduction exempts many people from paying tax; dependent deductions
Credits None
*19% rates, taxable income for a married couple filing jointly
*total taxes proposed by House Majority Leader Dick Arms; R-Texas; Treasury
Department estimated 21% rate needed to raise same revenue as current income
box
certain deductions," the Kemp commission report said, specifically mentioning those for mortgage interest and gifts to charity.
Dole will give the Kemp report a qualified embrace, urging it to be used in building a Republican consensus for tax reform. But he won't get too specific.
Knight-Ridder Tribune
Dole, a former Senate Finance Committee chairman, told aides he had never seen a single-rate plan that did not balloon the deficit. Gramm aides conceded Tuesday that their plan would cost the government at least $40 billion a year, but Gramm promised to make it up with spending cuts.
Most analyses suggest some middle-class families would pay more under a flat tax. In this regard, Gramm says his plan is superior to the Forbes approach because he preserves the mortgage interest deduction. Still, Gramm aides could not rule out the prospect that some in the middle class might see their taxes go up, at least temporarily.
That weighs heavily on Dole at a time when Clinton already is targeting suburban middle class voters by accusing Republicans of cutting environmental protection and college-aid programs.
If Dole maintains his lead in the GOP presidential race, it will be in his power to determine how specific Republicans get in promoting tax reform in the coming campaign. And he is no fan of flat tax fever.
Dole favors a more general discussion of tax reform until after the election.
"There's nothing President Clinton would like more than Republicans to adopt the flat tax as part of their 1996 election strategy," Dole said Tuesday. Dole said that if they did, Clinton would go out and make the case, 'Here they go again, helping the rich. Helping the Malcolm Forbes of America and others.'
"And that's not what I think should be our campaign — to walk into that trap."
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