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GOP's Tax Code Termination Act Hits Snag

By Thomas B. Edsall
Washington Post Staff Writer
Sunday, March 15, 1998; Page A04

The growing momentum among Republican lawmakers to pass the Tax Code Termination Act -- a proposal that would wipe the current income tax off the books as of Dec. 31, 2001 -- has hit a major snag: a confidential Republican National Committee poll showing that a majority of voters are ready to believe it's a reckless move.

Supporters of the legislation had been counting on the private RNC poll to demonstrate that this radical proposal is a winner for the GOP. Instead, according to Republicans familiar with the findings, the poll showed that by significant majorities voters are inclined to believe Democratic criticisms of the legislation -- mainly that it poses dangerous economic risks.

The poll numbers, which were compiled late last week and have just begun to make their way to top party and elected officials, are likely to make more difficult the efforts by a number of Republicans to make this the one big tax idea the party can agree on this year. In recent months the bill has gained the backing of GOP majorities on both sides of Capitol Hill: 153 representatives and 36 senators have signed on as sponsors.

Their view has been that the tax termination legislation offers the opportunity to establish an effective polarization between Republicans and Democrats, giving the GOP an issue to hammer on in this year's House and Senate elections and in the presidential contest in 2000.

"It's an absolute political winner," declared Sen. Tim Hutchinson (R-Ark.) before the poll results came in. Referring to President Clinton's legendary ability to co-opt conservative initiatives, Hutchinson said: "This is the bright line. There is no way the president can fudge on this issue."

In fact, both the RNC poll and studies by Democrats have found that the issue is only a "bright line" when presented without including any of the Democratic criticisms. Without doubt, the public is discontented with the current tax system. But it is also responsive to arguments made by the Clinton administration that killing the tax code without clearly spelling out a replacement risks dangerous economic repercussions.

Clinton and his aides contend that corporations and individuals, unsure of future tax liabilities, would be reluctant to make investments, buy homes, expand factories or make decisions crucial to continued growth and expansion. When asked whether administration or GOP arguments are more credible, the RNC poll found majorities siding with the Democratic position.

The GOP proposal is not seen by the public "as a conservative proposal," said Mark Penn, the president's pollster. "In some ways it is a dodge by the Republicans who can't get together on a tax plan, so maybe they can get together on an anti-tax plan. But people see that an anti-tax plan is not a solution."

The bill declares: "No tax shall be imposed by the Internal Revenue Code . . . for any taxable year beginning after December 31, 2001." Without binding Congress to anything specific, the measure declares that "any new Federal tax system should be a simple and fair system that applies a low rate to all Americans, provides tax relief . . . protects the rights of taxpayers . . . eliminates the bias against savings and investment . . . promotes economic growth . . . and does not penalize marriage or families." The legislation suggests without mandating that the new system "should be approved by Congress in its final form not later than July 4, 2001."

By avoiding any specific commitments on tax provisions, the measure puts off consideration of some of the most divisive tax issues within the Republican Party. These include the question of whether to support a flat income tax or a national sales tax, whether popular deductions for mortgage interest, charitable contributions and retirement savings should be retained and whether some progressivism should be maintained.

By ignoring these disputes, backers of the tax termination legislation have been able to add as sponsors both House Majority Leader Richard K. Armey (R-Tex.), an outspoken proponent of a flat tax, and Rep. W.J. "Billy" Tauzin (R-La.), a leading advocate of switching from an income-based federal tax system to a national sales tax.

That same vagueness has given Clinton and the Democrats a way to target voter fears. The proposal "would cripple families' and businesses' ability to plan and save for the future while the uncertainty [of a new tax code] existed," Clinton told the Mortgage Bankers Association this month. "No one concerned about fighting crime would even think about saying, 'Well, three years from now we're going to throw out the criminal code and we'll figure out what to put in its place.' . . . That is what this proposal is."

In a joint statement, Hutchinson and Rep. Steve Largent (R-Okla.) charged that Clinton's critique is "long on fear and short on facts." The two contended that "far from being a leap off a high cliff into a sea of uncertainty, the Tax Code Termination Act will place taxes and spending [which must be annually appropriated] on an equal footing and will initiate a national debate on the workings of the current tax code."

The legislation has prompted "a national movement, spearheaded by private organizations like the National Federation of Independent Business and the National Taxpayers Union," Largent and Hutchinson said.

Passage of the termination legislation before the 2000 election would turn the presidential contest into a referendum on whether the public trusts the GOP or the Democratic Party to conduct a complete overhaul of the tax system, according to Grover Norquist, head of Americans for Tax Reform. He predicted that voters would conclude, "If you elect a Republican President to go with a Republican House and Senate, you probably will have a flat tax rate."

GOP pollster and strategist Frank Luntz praised the politics of the legislation. "The public hates the IRS more than virtually any government institution. . . . [The tax issue] is one of the best advantages the GOP has because you don't have to be rich to resent the tax code, you don't have to be on the right to be afraid of the IRS," he said.

These views are, however, by no means unanimous among Republicans. Linda DiVall, a GOP pollster, countered: "To simplisticly suggest that we should eliminate the IRS without a structure in place to make sure that taxes are still paid in a progressive fashion is not one that Americans are prepared to accept." Similarly, pollster Neil Newhouse contended that in a fight over the GOP's tax termination bill, "Clinton scores in that debate. . . . How it would be replaced and what it would be replaced with, he wins because there is no clear answer."

The Tax Code Termination Act is part of a two-decade long struggle by the GOP to capitalize on middle-class anger at escalating tax burdens and bracket creep to help build a majority coalition. Major milestones in this history include California's tax-limiting Proposition 13 in 1978, which demonstrated in miniature a coalition similar to Ronald Reagan's winning majority in 1980, when he campaigned in support of the Kemp-Roth 30 percent tax cut.

In the 1992 election, Republicans learned the hard way how damaging it is to be on the wrong side of the tax issue, when voters abandoned President Bush after he had raised taxes the year before. Two years later, the GOP rebounded to take over the House and Senate in part because of voter anger at the tax increases included in the Clinton administration's 1993 budget legislation.

During the 1996 Republican presidential primaries, magazine heir Malcolm S. "Steve" Forbes raised his status from a virtual unknown to a serious competitor largely on the basis of his assault on the IRS. "You can't tinker with the tax code. You can't reform it. You must kill it, drive a stake through its heart, bury it and hope it never rises again," he told applauding Republican audiences.

And just last September, Republicans thought they had tapped into a new vein when hearings on IRS abuses won widespread publicity and rekindled voter fury at the feared federal agency. GOP strategists thought they had Democrats backed into a corner when Republican leaders proposed legislation shifting the burden of proof so that taxpayers would be presumed innocent until the IRS demonstrated their guilt.

The administration initially opposed the legislation sponsored by House Ways and Means Committee Chairman Bill Archer (R-Tex.). But after Minority Leader Richard A. Gephardt (D-Mo.) jumped ship and signaled he would back the GOP bill, the Clinton administration quickly shifted gears and joined the growing crowd supporting legislative restrictions on the IRS.

"He beat us by making the whole thing bipartisan," a Republican strategist bitterly complained. So far, at least, Clinton has determined that in the case of killing the tax code, fighting is still the better way to go.

© Copyright 1998 The Washington Post Company

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