- The Washington Times - Monday, December 9, 2002

One of the most significant, postelection changes in the Democratic Party recently is the grudging movement toward tax cuts.
After nearly two years of bashing President Bush's across-the-board tax cuts, some Democrats now seem to be talking up that idea to boost business expansion, job creation and economic growth.
Massachusetts Sen. John Kerry, who is seeking the Democratic presidential nomination, rolled out a major economic plan last week that called for a one-year cut in Social Security payroll taxes, reducing the capital-gains tax rate for technology investments, and ending double taxation on dividends.
Mr. Kerry's plan followed the Democratic leadership's 11th-hour election plan that called for a modest business tax cuts to stimulate plant and equipment expansion and raised the possibility of a payroll tax cut.
Former President Clinton, in an address last week to the Democratic Leadership Council in New York, urged Democrats to break with their rigid anti-tax-cut position and "split the difference" with Republicans on cutting tax rates and beefing up Social Security.
Can it be the Democrats are finally getting the message that voters think taxes are too high? Despite their class-warfare campaign attacks on President Bush's tax cuts, they lost the Senate and suffered further erosion in the House. Sales-tax-increase referendums were killed everywhere.
But let's not get too carried away by their flirtation with tax cuts. There are also tax increases in their plans.
Mr. Kerry, for example, would repeal tax cuts for those in the top brackets (the people who pay most of the income taxes), eliminate many tax incentives for corporations and keep the estate tax. All these actions would raise taxes on small businesses and big corporations who, after all, employ most of America's workers.
Even Mr. Kerry's elimination of capital-gains taxes for "investments in critical technology companies" smacks of industrial policy where the government, not the free market, would pick the winners and losers in our economy.
The Democrats' micro-shift on tax policy is taking place in the midst of Mr. Bush's decision to replace his two top economic advisers, Treasury Secretary Paul O'Neill and White House adviser Larry Lindsey, with a new team and a lengthy internal debate within the administration over what will be in its forthcoming economic stimulus package.
Business advisers who have attended White House "listening sessions" tell me there is widespread disagreement over what should go into the plan.
These sessions were hosted by Mr. Lindsey and Karl Rove, the president's chief political strategist. "They wanted to know our views on what should be in the package. They listened. They took notes. They gave no indication what will be in the package," said a key outside adviser I interviewed.
Even so, the sessions give us a clue about where the disagreements lie and let us peek into what the administration opposes.
For example, there is "a big food fight" whether to accelerate the depreciation tax write-off schedule, says one participant. High-tech industry lobbyists are for it. So are the manufacturers. But the corporate-based, public-policy lobbyist group Business Roundtable is opposed. They are pushing for accelerating Mr. Bush's 10-year tax cuts.
As for Democratic proposals to temporarily cut payroll taxes, the White House dislikes the idea because they say it will weaken Social Security and "compromise its integrity."
The National Federation of Independent Business, the nation's largest small business lobby, also opposes payroll tax cuts, saying "it would be an administrative nightmare."
But as each business leader spoke, there was general agreement on the package's overall shape and size.
"There was broad consensus among the groups there that it ought to be big enough to be meaningful and it ought to be focused on dividends, consumers and investors as opposed to businesses," said a participant.
Another key adviser at the meeting said "the threshold question needs to be, does it meet the test of being stimulative and work its way rapidly into the economy."
Business lobbyists who attended the White House meeting want something to encourage new investment, like lower taxes on dividends and speeding up the tax rate cuts to put more income in people's paychecks to boost consumer spending.
The mood around the table was a little downbeat yet hopeful that things will turn around next year.
One participant put it this way: "You have to accept the fact that this economy is not in the best of shape. Talk to real business people, and things are not great. This, after all, is the president's and his party's economy."
That was the bluntly worded message Mr. Rove and Mr. Lindsey took back to the president, who must now decide how aggressive he needs to be in his tax cut package for 2003.
With the voters clearly shifting further to the right and liberal Democrats like Mr. Kerry calling for modest tax cuts of their own, including dividend tax relief, Mr. Bush can afford to propose a much bolder tax stimulus package than anyone believed was possible before Nov. 5.
The betting in this corner is that he will.

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

LOAD COMMENTS ()

 

Click to Read More

Click to Hide