Take a Hike

What to do about Bush’s tax cuts? The Democrats fight it out.


Nobody ever got elected by promising a tax hike, so Democratic presidential hopefuls are treading very carefully around the issue of George Bush’s tax cuts. The most recent debate had the candidates clashing over how far a repeal shoud go. Dick Gephardt wants the cuts rolled back in their entirety; Kerry, Clark, and Edwards favor rescinding the cuts for the wealthy but letting the middle class keep its gains. It’s not clear what Howard Dean wants to do. He was in favor of a total rollback; now he seems to have changed his mind.

Bush’s tax cuts are a delicate matter for the Democrats. They want to critique Bush but don’t want to give Republicans to tar them as “tax and spend” liberals, as they did to great effect in the 1980s. Bush’s cuts, which some Democratic supported in 2001 and 2003, will total $266 billion this year, and reduced all income tax rates, raised the tax credit for families with children, reduced tax rates for married couples, reduced the tax on large estates and cut taxes on capital gains and dividends.

There’s an argument to be made, of course, that the tax cuts are responsible in large part for the massive hole in the country’s finances. But individual voters don’t tend to make that connection; they just know if they’re paying more or less tax than before, and they like that they’re paying less. Hence the Democrats are focussing on the inequity of the Bush tax cuts rather than the principle of tax cutting at a time of huge deficits.

Dean, for one, charges consistently that the middle-class tax cut was an illusion. Millionaires got tax cuts of $112,000, he said, while three out of five Americans with incomes up to $45,000 got tax cuts averaging $304.
Dean calls Bush’s tax breaks: “$ 3 trillion worth of tax cuts for his wealthy contributors.”

Reversing some of the cuts to the wealthy will be the most politically popular. But Bush tax cuts also provide some relief to middle-income Americans — in some cases only a few hundred dollars, but in other cases as much as $2,000 or more.

And Democrats know that if they roll back Bush’s cuts, the stigma of tax-happy Dems will reemerge.
Bruce Reed, a former Clinton domestic policy adviser who is now the head of the Democratic Leadership Council, a centrist group that has been critical of Dean. “Republicans have spent 30 years trying to convince America that all we want to do is raise people’s taxes, and we’d be crazy to hand them that chance again.”

Republicans have already seized the opportunity to tag Dean as a tax-and-spend liberal. A new television advertisement in Iowa produced by the Club for Growth, a conservative group, shows a man and his wife denouncing Dean’s “tax-hiking, government-expanding, latte-drinking” policies.

One indication of the power of the issue is Dean is bowing to the pressure. Apparently he will soon reveal a new tax plan that is widely expected to concede that repealing all the middle class tax cuts isn’t such a good idea.

The New Republic calls Dean’s decision to switch positions on the issue crucial to his campaign:

“Dean will probably discard his (and Dick Gephardt’s) contention that America can achieve economic security only by repealing President Bush’s tax cuts. As Dean-o-phobe has pointed out, this means raising taxes on the middle class, which, of course, is tantamount to political suicide. At long last, thankfully, Dean is coming to a position for which Wesley Clark, Joe Lieberman, and John Kerry have been stumping all season. Tagged with the moniker “tax reform,” Dean’s forthcoming plan will probably do the same thing as theirs: preserve the middle-class tax cuts while reversing the upper-class ones.”

Some are hailing Clark, who is emerging as the un-Dean candidate, as having the most promising tax plan. He’s aligning himself with the Clinton legacy and hopes to appeal to middle Americans by removing tax cuts to the very wealthy but leaving theirs in place. His plan essentially calls for the elimination federal income taxes for a family of four with income of less than $50,000, cut taxes for other families with incomes up to $100,000, and raise them on Americans who make $1 million or more a year.

But some conservatives are saying this is a line that’s been used before, most recently by Clinton. The Wall Street Journal:

“…Mr. Clark’s “reform” is essentially an updated version of the tax jujitsu that Candidate Clinton offered back in 1992. Promise to raise taxes only on the upper middle class and wealthy, while offering to cut taxes on a slew of “middle-class families.” Once Mr. Clinton took office, you may painfully recall, the middle-class tax cut vanished and everyone got socked with some kind of tax hike.”

John Edwards’s tax position is also in the spirit of Clinton, suggesting tax credits to help middle-income families buy first homes, pay for health insurance, and save for college and retirement. Edwards says of Dean’s recent change of heart:
“The only thing I can say is that it’s amazing what politicians will do when the election is approaching.”

Still, Clark, Edwards, and many of the other Democratic candidates, may hit a speedbump in their tax talk. Economists predict that the U.S. economy is steadily getting better, and some argue that the average American won’t care what’s happening with the wealthy, as long as they’re getting a cut of the pie. The American Prospect:

“The basic Bush tax strategy has been to yoke very large tax cuts for the very wealthy together with modest relief for middle income taxpayers, and it’s a strategy that’s worked very well for him. Democrats can scream until they’re blue in the face about how most of the benefits accrue to the rich, but I think most people are more interested in what they’ll be getting than in whether or not some other people are getting too much.”

Democrats may need to find a new issue to nail Bush on.