- The Washington Times - Monday, January 10, 2000

Who says tax-and-spend liberalism is dead? Candidates from both major parties are busy bringing it back in their campaigns for the 2000 presidential contest.

Among the Democrats, Bill Bradley is calling for a whopping $125 billion increase in business taxes. He has disguised his tax increases in the language of closing tax shelters and loopholes, and ending "corporate welfare." But what he is really proposing is higher taxes on businesses and consumers to pay for the new social-welfare spending he would initiate as president.

The changes Mr. Bradley wants would significantly raise taxes on U.S. corporations that do business overseas, on oil and gas producers, mining companies, and ranchers who graze livestock on federal lands. Mr. Bradley would give the IRS more power to step up tax audits on businesses when the IRS has too much power as it is.

Most of the tax credits and other provisions he would abolish were put into the law to even out inequities in the tax code. For instance, provisions in the tax code that lower the cost of doing business abroad exist to prevent U.S. firms from being forced to pay taxes twice to the host countries where they do business, and here at home where their corporate offices are headquartered.

"The fact of the matter is that this would increase taxes," says Martin Regalia, the U.S. Chamber of Commerce's chief economist. "The so-called loopholes were put in there to readjust inequities in the tax code that would make U.S. companies less competitive in foreign markets.

"His plan is a time-worn way to raise taxes on business. What Bradley has done is to label these offsetting adjustments as loopholes, when they were put into the tax code to put companies on an equal footing," Mr. Regalia told me.

Mr. Bradley tries to cloak his tax proposals in the rhetoric of tax fairness. "When a tax break is created to help only a few people, or a company finds a way to not pay taxes, we all end up paying more," he said last week in New Hampshire, where he unveiled his tax-increase plan.

But Mr. Bradley's motivation is not tax fairness as it once was when he championed lower tax rates in the 1980s. He wants to increase revenue so he can spend more on dozens of new health-care, education and welfare programs.

The perverse result of this taxation will be to reduce the economic growth that has been the driving force behind the wave of federal revenue that has erased the deficit and created a budget surplus.

"It would substantially reduce GDP [gross domestic product]. The effect would be significant," said Gordon Richards, the chief economist of the National Association of Manufacturers.

Meanwhile, in the Republican presidential primary, Sen. John McCain is sounding more and more like a Democrat as he attacks Gov. George W. Bush's tax-rate reductions as a scheme "to help the rich."

Using the same demagogic liberal rhetoric that we are used to hearing from Bill Clinton, Al Gore and House Democrats like Richard Gephardt of Missouri and David Bonior of Michigan, Mr. McCain says Mr. Bush's tax plan is "unfair because it favors the rich."

"Sixty percent of the benefits from his tax cuts go to the wealthiest 10 percent of Americans, and that's not the kind of tax relief that Americans need," Mr. McCain said.

In fact, Mr. Bush's tax-rate reduction plan, which reduces the number of tax brackets from five to four, calls for larger rate reductions for the bottom income brackets than it does for the top brackets. Even Robert Reischauer of the Brookings Institution, who does not support tax cuts, concedes Mr. Bush's rate reductions are "progressive," and tilt more toward lower-income people.

Mr. McCain not only uses the class-warfare rhetoric of the Democrats, he embraces their skewed mathematics as well. It is true that, in dollar terms, the largest percentage of benefits goes to those in the higher brackets. But that's because they pay most of the taxes. The top 5 percent of income earners in the country pay 50 percent to 55 percent of all income taxes. The bottom 60 percent pay 4 percent to 5 percent.

Mr. Bush would take millions of workers in the 15 percent tax bracket and put them in a 10 percent bracket. Mr. McCain merely expands the 15 percent bracket.

The left-leaning Arizona senator knows better. But he opposes the kind of across-the-board income-tax cuts Ronald Reagan signed in 1981, and that Mr. Bush proposes now. Mr. McCain thinks the economy will not grow beyond the low 2.4 percent projected by the administration and the Congressional Budget Office, and that the budget surpluses won't get much larger than current forecasts.

To whom is Mr. McCain listening? His declinist fiscal guru is former New Hampshire Sen. Warren Rudman, who is fixated, Hooverlike, on paying down debt instead of spurring economic growth. Mr. Rudman and the Concord Coalition he heads are notorious for being against tax cuts.

Mr. McCain wants to spend not only the Social Security surpluses to pay down the debt (which is already in decline), but also much of the non-Social Security, general-fund surplus, too leaving little to cut excessively high tax rates.

This is not the cause of free-market economic growth that Ronald Reagan and Jack Kemp championed, and that Mr. Bush champions now. It is a left-leaning, debt-obsessed, big-spending agenda that says the top tax rates are fine where they are and that the surplus should not be given back to the people who earned it. No wonder Mr. McCain is doing poorly in just about every state except New Hampshire.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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