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Blunting GOP's Tax-Cutting Edge

The Budget
By George Hager and Thomas B. Edsall
Washington Post Staff Writers
Monday, February 8, 1999; Page A1

Five years after nearly being driven into political oblivion over the tax hikes in his 1993 budget deal, President Clinton has rebounded so well that he and congressional Democrats now appear close to dominating what once was the Republicans' signature political issue: tax cuts.

Going into a year in which both parties hope to make the fight over cutting taxes a showdown over their vision for government and a warm-up for the 2000 presidential race, Clinton holds a surprising amount of the political high ground.

Polls show the country trusts him more than Republicans on this issue. His targeted tax cuts for stay-at-home parents and other groups have blunted the GOP's drive for big across-the-board tax cuts. Mainstream economists say the booming economy has undercut the argument that a tax-cut stimulus is necessary. And Clinton has once again maneuvered to put Social Security and Medicare between the GOP and enactment of anything but a negotiated settlement with Democrats.

"If any issue can bind Republicans internally, it is tax cuts," said Marshall Wittmann, director of congressional relations for the Heritage Foundation, a conservative think tank. "Of course, the challenge is to deal with a president who is extremely wily in using tax cuts against them."

Having watched Clinton neutralize or snatch away almost all their wedge issues – defense, the budget deficit, welfare and crime – Republicans now worry that the crown jewel is next. "There's a great fear internally that Clinton will take the tax issue away," Wittmann said.

With the end in sight of the Senate impeachment trial that polls show has bruised the GOP politically, Republican strategists are eager to use tax cuts as a way of changing the subject. GOP leaders have already introduced tax-cut proposals or promised them soon; tax cuts are to be the marquee item in the Republcan drive to craft a budget resolution, an effort that will begin in earnest later this month.

Clinton's recovery on the tax issue is testimony to both his political resilience and the vigorous economy. The relentless GOP criticism of his tax-heavy 1993 budget deal badly eroded public confidence in his ability to handle the economy and contributed to the Democrats' stunning loss of the House and Senate in 1994. As leader of a discredited party at a time when then-House Speaker Newt Gingrich (R-Ga.) was setting the national agenda, Clinton suddenly seemed almost irrelevant. Now, he threatens to seize control of an issue that has defined the GOP for much of the recent political era.

For nearly two decades, since the tax revolt of the late 1970s and the 1978 approval of the anti-tax Proposition 13 in California, opposition to taxes has been a mainstay of the Republican Party, and the portrayal of the Democrats as members of the "tax and spend" party has been a key to Republican victories.

But in the view of strategists for both parties, Clinton has since 1995 adroitly painted the GOP into a corner on tax issues while protecting his own flanks.

When Congress's new GOP majority demanded big tax cuts in 1995, Clinton killed their effort by insisting that they meant to pay for "If any issue can bind Republicans internally, it is tax cuts. . . . The challenge is to deal with a president who is extremely wily in using tax cuts against them."

– ‚Marshall Wittmann,

director of congressional relations

for the Heritage Foundation

the cuts by cutting Medicare spending – a charge that Republicans furiously denied, but which grievously wounded them with voters.

When Republicans demanded big tax cuts last year, funded by the first budget surplus in a generation, Clinton stymied them again by insisting that both parties save the surplus for Social Security.

And when Republicans accused Clinton and the Democrats of being against any tax cuts at all, Clinton pointed to a series of narrowly focused tax breaks. This year, for example, Clinton is calling for tax credits for disabled workers, for employers who provide day care facilities for employees, and for families who provide long-term care for disabled relatives, among others.

The White House proposals are "targeted at the moments in people's lives when they have the greatest need," said Deputy Treasury Secretary Lawrence H. Summers, explaining the administration's philosophy of using the tax code to solve societal problems.

The president has turned the debate into "micro tax cuts versus one large tax cut," said GOP pollster Bill McInturff. "The public is so generally skeptical about politicians delivering on tax cuts" that proposing specific small credits for education or care of the elderly has more credibility with the electorate than dramatic proposals.

Still, on Capitol Hill and on the presidential hustings, a major tax cut remains the device with which the GOP hopes to help voters forget impeachment. Congressional Republicans are pushing this year for a 10 percent across-the-board income tax cut, all paid for by huge new surpluses projected in the non-Social Security budget over the next 10 to 15 years. Both parties have agreed to set aside about 60 percent of the budget surplus to fix Social Security, drawing battle lines over the remaining 40 percent or so. This is the money the GOP would spend to cut taxes.

"To me, it is a moral issue," said House Budget Committee Chairman John R. Kasich (R-Ohio). Like other GOP leaders, Kasich argued that it is crucial to get the surplus out of Washington before politicians can spend it to make government bigger. "What we believe is that people ought to have their own money in their pockets," he said.

Prospective presidential candidate Malcolm S. "Steve" Forbes, who ran in 1996 on a tax-cutting platform, contended that "the key is for the GOP to show leadership again on the tax issue" if it is to become fully competitive in 2000. The GOP needs to push the message that "we have peacetime, prosperity and revenues gushing, and they [Democrats] don't want to give meaningful tax cuts," Forbes said. "They always find a way to keep their hands on your wallet and your purse. We want to get those hands off."

But survey data suggest that Republicans face an uphill struggle in making their case. A Time/CNN poll released late last month showed that when voters were asked whom they trusted, Clinton or the GOP Congress, on Social Security, Medicare, tobacco policy, education and taxes, Clinton won in every category. Clinton's 56 percent to 31 percent advantage on Social Security, a traditionally Democratic issue, was not surprising. What stood out was that Clinton led on taxes by 50 to 35 percent.

Jan van Lohuizen, whose firm conducts polling for the Republican National Committee, warned that tax-cut proposals will not serve as silver bullets for the GOP, restoring the party to the good graces of the electorate.

Instead, he said, "what is going to pull us out of the malaise is achieving something, and achieving something on a bipartisan fashion," ideally reaching agreement with the Clinton administration on a way to deal with the problems of Social Security.

Meanwhile, in an effort to prevent the opposition from making inroads on taxes, Democrats are busy hammering the GOP's proposals with class warfare rhetoric, noting that cutting taxes by a flat percentage gives the biggest cuts to the best-off taxpayers. Clinton warned last week that GOP tax cuts would "benefit, clearly, the wealthiest Americans."

Democrats are distributing an analysis of the GOP's 10 percent tax-cut proposal by Citizens for Tax Justice, an organization with strong union support. The study found that the top 1 percent of taxpayers would get 32 percent of the total tax cut, or an average $26,697 reduction each; by contrast, the bottom 60 percent of taxpayers would get only 9.3 percent of the cut, or an average reduction of just $99 a year.

Clinton also charged that GOP tax-cut plans would come at the expense of his proposal to devote some 40 percent of the non-Social Security surplus to shoring up Medicare – a virtual replay of what Republicans dubbed the "Medi-scare" tactics that Clinton leveled at them in 1995-96.

Republicans shot back that no less a Democratic icon than President John F. Kennedy backed across-the-board tax cuts in the early 1960s. "Jack Kennedy is pretty good company," said Sen. Phil Gramm (R-Tex.), a staunch supporter of across-the-board cuts. "I think most Americans are going to say, 'If I get my 10 percent and [West Virginia Democratic senator and Rockefeller family heir] Jay Rockefeller gets his 10 percent, I can live with that."

Although some GOP politicians are abandoning the tax-cut bandwagon, most congressional Republicans and analysts feel they have little choice but to forge ahead. Republican strategist Ed Gillespie said the last congressional election showed that Republicans beat Democrats among voters whose key issue was taxes; the problem was that only about 10 percent of voters said that taxes were a key issue. "What's that mean? That means we have to make taxes more of an issue," Gillespie said.

And that means finding a way to get traction on tax cuts. "It is an issue they must engage on," said the Heritage Foundation's Wittmann. "If they can't win that fight, there is really no restraint on the growth of government, and what is the major defining issue between the two parties?"

© Copyright 1999 The Washington Post Company

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