- The Washington Times - Wednesday, February 12, 2003

DALLAS, Feb. 12 (UPI) — Valentine's Day is just around the corner, and florists are pushing flowers as "the language of love." Anyone following the news knows the debate over tax legislation is beginning in earnest. Policy-makers and elected officials are squaring off. Their weapons? Words. The language of taxes is not as romantic as that of love, but it will affect you a lot more.

This language war has actually been getting interesting for some time. In the last Congress, Republicans and some Democrats renamed a tax and won a victory. The "estate tax" became the "death tax" and resulted in the first meaningful reform of what working people could pass on without taxation, despite complex schedules and regulations and a weird provision returning heavy taxation in 2010.

The name change was key. The public did not favor abolishing the estate tax. Super-rich people have estates, probably for their polo ponies and servants. The public did, however, favor abolishing a tax on the lifetime savings of somebody who owned a store or business and who had paid taxes on the money he or she saved. Or on a family with a farm which had increased dramatically in value, although not in generating cash, simply because the land was more valuable to developers. Or on a business someone like me had built up over decades.

If I leave my business to my children, they have to sell it to pay the taxes, or I have to buy insurance which costs about as much as one employee salary per year. Translation: one less job.

The public thinks those people have a right to pass that money on to their kids. The change in language changed public perception and the political outcome.

A vivid example of how the name of a tax helped get it passed was the ill-fated "luxury tax," passed in 1991 to increase taxes on presumably frivolous or unneeded items such as expensive jewelry, yachts and private planes. Democrats successfully promoted the idea that this would be sort of "free money." The history of what actually happened should be a required case study for every American — because it is so easy to understand.

Ordinary workers built those yachts and planes. Anyone who wanted a yacht — just a boat with a fancy name, another example of how names influence perception — could buy a used one or could decide to make so with the current one. 25,000 jobs were lost in the boat building business, many in the New England states whose senators pressed for a luxury tax. Government paid $24 million in unemployment compensation to those workers. The "luxury" tax turned out to be a luxury the country really couldn't afford. Luxuries were defined to include beer. Why ordinary Americans put up with this is beyond me.

Now we are discussing how to tax income. It is an economic debate — where will infusions of money boost the economy most? — and a philosophic argument. Who should make the decisions about spending that cash? Liberals want government to allocate resources through what they call "targeted tax cuts" or increased "worthwhile" government programs.

Notice, that a "targeted tax cut" means you reward dependable voter groups, and a "worthwhile government program" is also one which rewards your allies. Conservatives, largely but not exclusively Republicans, argue that our economy is increasingly dependent and needs to reward investment and risk taking. Put money back in the hands of people who invest it, and they will use it to fund productive industries, expand companies that provide jobs and so on.

As with the death and luxury taxes, this is a war of words. The Democrats have attacked the president's plan as providing tax "breaks" for the "rich." The word "break" implies something undeserved. As in, "the cop stopped me for speeding but he gave me a break," meaning he didn't give me a ticket. No one defines himself as "rich," so this means someone guy will pay the bill.

To counter the concept of "breaks" for the "rich," Republicans need to hold on for dear life to words like "fairness," "jobs" and "working Americans," since that's how most of us see ourselves, and assure Americans, "It will work," and "We must allow people to invest in the future."

There is a tendency to get bogged down in facts. When the Democrats trumpet the Brookings Institute's comment that 60 percent of the tax "breaks" would go to people making more than $100,000, Republicans rush to point out that the top 10 percent of wage earners pay 67 percent of the taxes, the top five percent pay 56 percent. A few people make decisions based on macroeconomics. Most of us do not. On the issue of taxing income, Republicans have an uphill language battle.

They are in better shape on the issue of "double taxation" of dividends. The word "double taxation" sounds unfair from the get go. The Republicans have a chance to gain the advantage with language. President Bush's proposal is fairer, and it will improve how American business operates. Only after stating the principle, do you get to the facts: if a company makes a profit, pays taxes, and pays the money that's left to shareholders, the shareholders shouldn't have to pay another income tax.

For example, my little company makes money, pays our employees and those salaries are deducted from our overall earnings before taxes are figured. Then the employee pays taxes on his salary. The idea is to treat dividends the same way. Or, a big company can borrow money to expand, and deduct the cost of interest but not the cost of dividends. Many companies attract investors by trying to boost share price rather than paying dividends. We all know where that's led CEOs over the past few years.

Somehow, I don't think Americans are going to decide to favor ending double taxation by the arguments about interest deductibility or global competitiveness with countries which don't tax dividends. I think Americans will decide because they think a "double tax" is unfair. They want to hear their leaders say, "The president's proposal is fairer, and we believe it will make the system work better."

The communication principle is that a simple promise, articulated by someone the listener trusts, is more important that a complicated analysis, no matter how persuasive to the sophisticated listener.

There are few more words in the debate, closing "loopholes" prime among them. Like a "break," a "loophole" is something the recipient has unfairly exploited. "Loopholes" are actually created by Congress' inability to resist complexity. Personally, I hope the administration will press Congress to limit the annual complexity tax to ten new pages of regulation in 14 point type.

Roses may be the Valentine's language of love, but in the language of taxes, both Gertrude Stein and Shakespeare were wrong. In taxes, "A rose is not a rose is not a rose," nor will 'a rose by any other name smell as sweet,' when we're talking about the taxes paid by the guy who owns the rose growing business.

Democrats want voters to think the business owner is "rich." Republicans need to point out the business will hire more rose growers. The Democrats will point out the owner lives in a big house, so Republicans need to point out that more rose growers will be able to buy their own houses.

Ladies and gentlemen: the battle has begun. Choose your words.

— Merrie Spaeth, director of Media Relations for President Reagan, is president of a Dallas-based consulting firm and is a regular commentator on public radio and television.




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