TCS Daily

A Taxing Election

By W. James Antle - July 29, 2004 12:00 AM

When planning a national convention, both political parties look back at their last several conventions in an effort to imitate past successes and avoid previous blunders. Even before the Democrats gathered in Boston, you could be sure that one gaffe would not be repeated: John Kerry wouldn't echo Walter Mondale's bold, if politically disastrous, pledge to unequivocally raise taxes.

Why not? Just as Mondale proposed rolling back some of Ronald Reagan's tax cuts, the Kerry-Edwards ticket is committed to repealing a portion of President Bush tax cuts, which would raise the top marginal income tax rate from 35 percent to 39.6 percent. This is by definition a tax increase, at least on Americans with income subject to those tax rates.

Ever since the Reagan years, Republicans have more or less owned the tax issue. In each presidential election, the Democratic standard-bearer is forced to distance himself from his party's tax-and-spend legacy. This is sure to be part of the GOP's refrain against Kerry this year, even though at least some polls show this traditional partisan advantage fading.

Mindful of recent history, Kerry has tread carefully on taxes. When his rival Howard Dean proposed repealing the Bush tax cuts in their entirety -- thus offering the voters a Mondalesque across-the-board tax increase -- Kerry sharply rebuked him, promising to preserve those tax cuts going to the middle class. Dean may have gotten a primetime speaking slot, but it was Kerry who walked away with the nomination.

Indeed, the Democratic platform explicitly promises to raise taxes only on the wealthiest Americans and to actually cut taxes for the remaining 98 percent. Here, as in so much else, they have taken a page from Bill Clinton who beat the "tax-and-spend liberal" rap by promising a middle-class tax cut coupled with higher taxes only on the richest 1.5 percent.

Since the 2000 presidential campaign, the Democrats have been consistent in attacking the Bush tax cuts as a gift solely benefiting the top 1 percent of income-earners. The Democratic platform repeats a version of this charge, even though Kerry implicitly conceded that it is technically not true when he came out against a total repeal during the primaries.

This careful framing of the tax issue is smart politics; it may even help Kerry inoculate himself from the charge that he is a typical tax-hiking Democrat. This approach certainly didn't hurt Clinton in 1992. Of course, Clinton was running against an incumbent president -- another fellow named Bush, you may recall -- who had raised taxes. And he did not end up following through on his promised middle-class tax during his first term.

There are other reasons to cast a critical eye upon Kerry's promise to selectively raise taxes. The impending collision between real-income bracket creep and the alternative minimum tax is likely to result in higher taxes for more taxpayers than Kerry anticipates, a bite that will be worse if the top income tax rate goes up. Many of the people whom the Democrats list among the wealthiest Americans would not consider themselves especially wealthy and, when judged by criteria other than a year's income might not fit your definition of rich either. Some of them, in fact, are job-producing small business owners reporting their enterprise's income on their personal income taxes. Finally, as Clinton learned, when faced with contradictory goals of expanding government services while balancing the budget, broad-based taxes cannot be left off the table indefinitely.

The Republicans, however, have their own tax problems. The Republican-controlled Senate failed to pass legislation making the Bush tax cuts permanent. Without an extension, these lower tax rates will expire for all Americans, not just some wealthy subset of income-earners, in 2011.

Moreover, the fiscal-policy divisions within the GOP are a primary reason for the delay in the federal budget. A significant bloc of Republicans -- albeit disproportionately lawmakers from the moderate-to-liberal wing of the party -- are cool to tax cuts and want to shackle any further tax-cutting in pay-as-you-go budget rules. More conservative Republicans are continuing to push for tax relief despite the red ink. Notice that neither faction is actually proposing spending cuts, even though it is the level of federal expenditures that drives both the deficit and the pressure for higher taxes upward.

Although it is a much more formidable posture than Mondale's in 1984, it is nevertheless possible that the Democrats' promise to cut taxes for most Americans while raising them for only a few can be beaten at the ballot box. A precedent may be found in Kerry's home state. Frustrated that several attempts to introduce a graduated state income tax in Massachusetts proved unsuccessful, a group of liberal policy advocates put a version of their proposal on the ballot in 1994 that they claimed would raise taxes only on the rich while cutting taxes for some 92 percent of the commonwealth's taxpayers. Bay State voters did not buy it and resoundingly rejected the plan.

Yet it is much more difficult for the case against such an artfully crafted tax proposal to be made by politicians who have muddled the message of fiscal conservatism as thoroughly as today's Republicans have. The pressure for higher taxes and the susceptibility of the electorate to gimmicks that make it appear that someone else will have to pay them are both likely to grow in a climate of bipartisan profligacy.

Whatever else occurs in this election cycle, we may be in for taxing times ahead.

W. James Antle III is an assistant editor of The American Conservative.


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