President Bush and Sen. John Kerry have made raising and cutting taxes one of the top issues in the 2004 election, with each man attacking the other over who has the best tax-cut package and whom the reductions would benefit.
Mr. Bush said he plans to spur economic growth by cutting taxes across the board and increasing tax credits for those with children, expanding the earned-income tax credit and broadening the 10 percent tax bracket.
For his part, Mr. Kerry favors tax credits to help the lower and middle class, but says he will raise taxes on those making more than $200,000 annually, by “rolling back” Mr. Bush’s tax cuts and by killing certain business-tax credits, particularly one that encourages U.S. businesses to locate abroad.
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“Our plan will provide middle-class tax cuts that bring down the biggest costs facing parents — so they can get ahead and spend more time with their children. We’ll help parents cover the rising costs of child care by offering a tax credit of $1,000,” Mr. Kerry said.
The senator from Massachusetts also vows to lower the deficit and expand government health care programs and other spending, prompting charges from the president during the last debate that meeting all his promises would require him to raise taxes broadly.
“He’s proposed $2.2 trillion of new spending, and yet the so-called tax on the rich, which is also a tax on many small-business owners in America, raises $600 [billion] by our account — $800 billion by his account. There is a tax gap. And guess who usually ends up filling the tax gap? The middle class,” Mr. Bush said.
William Beach, director of the Center for Data Analysis at the Heritage Foundation, a conservative public-policy think tank, supervised a study of the Bush and Kerry tax proposals. He said that both plans have merit and that both candidates are misleading the public about the other’s tax packages.
“Mr. Kerry offers tax cuts to small and large businesses, and all of that happens before he raises taxes on the top tier,” Mr. Beach said.
But he said of Mr. Kerry’s vow not to raise taxes on anyone making less than $200,000 a year: “If you are a single person and you earn $147,000 a year, you will pay higher taxes, and if you are married and file jointly making $170,000, you will pay more taxes.”
He said the Kerry campaign didn’t like Heritage’s analysis, but noted that the campaign changed the numbers on its Web site to Heritage’s figures.
Mr. Kerry will cut taxes by about $686 billion over the next 10 years as opposed to Mr. Bush’s plan, which will cut them by $1.1 trillion. Mr. Bush cuts levies on both capital and income, while Mr. Kerry promises cuts only in income taxes.
But Mr. Bush and Mr. Kerry have virtually identical tax plans starting in 2010, according to Mr. Beach, whose study did not take into account either man’s spending promises.
“After 2010, both plans increase employment a lot, because they make the tax cuts permanent,” he said. But they would also “make the amount of publicly held debt worse.”
The national debt, Mr. Beach said, would rise by $987 billion under Mr. Bush’s plan and $637 billion under Mr. Kerry’s, with Mr. Bush adding to the national debt more quickly and before 2009, at the end of the next presidential term.
One issue that has not been discussed extensively by the candidates is tax reform and changing the structure of the U.S. tax code, although several plans are before Congress.
The Republican-backed ideas include replacing the income tax with a value-added tax on all products sold and traded, a national sales tax or a flat tax with few or none of the current deductions for such expenditures as home mortgages and education.
On the Democratic side, Rep. Chaka Fattah of Pennsylvania is pushing what he calls “consumption plus,” which would eliminate the income tax and replace it with a tax on all non-cash transactions — a proposal similar to a value-added tax.
But although Mr. Bush and Mr. Kerry talked about tax simplification and reform in January and February, neither man has given it prominent mention recently.
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