The Clinton administration greeted House Republicans' passage of their nearly $800 billion, 10-year tax-cut package yesterday with a political Bronx cheer, in the form of an analysis charging that the bill deliberately and heavily tilts its benefits to favor the nation's wealthiest taxpayers.
Republicans generally don't dispute that. Their response: That's fine with them. If the point is to cut taxes for people who pay them, Republicans say, benefits are going to flow heavily to the people who pay the most taxes.
"This is a debate in which both parties are absolutely right," said Clint Stretch, director of tax policy for the accounting firm Deloitte & Touche LLP. "The Republicans are absolutely right when they say . . . high-income people pay a disproportionate share [of total taxes]; the Democrats are totally right when they say when you cut income taxes across the board, a disproportionate share goes to the wealthy."
This latest flare-up in the long-running battle between the two parties over whose tax policy is fairer was provoked by a Treasury Department analysis of the House GOP bill that shows that nearly 80 percent of the value of the bill's tax cuts would go to the top 20 percent of American families, with only 0.3 percent going to the bottom 20 percent.
Treasury officials declined to comment on the study, but it clearly provided new ammunition for the administration's argument that the Republican-controlled Congress is proposing to cut taxes for rich taxpayers while all but ignoring those at the bottom end of the income scale.
"Their tax cut gives four times more benefits to the top 1 percent than to the bottom 60 percent. Now, who's that looking out for?" said Gene Sperling, director of the White House's National Economic Commission. Sperling was citing Treasury figures that showed the top 1 percent of families getting about 33 percent of the bill's tax breaks, while the bottom 60 percent of families get a little more than 7 percent of the cuts.
Treasury's analysis follows similar findings by liberal-leaning groups such as the Center on Budget and Policy Priorities and Citizens for Tax Justice, whose analyses say both the House and Senate GOP tax-cut bills heavily favor the wealthiest taxpayers.
"It's skewed toward people who are already very successful, people who don't need the tax cut," said Tyson Slocum, a policy analyst for Citizens for Tax Justice. "What makes more sense is to cut a break to people who need it most -- the poor and working families . . . not people who do not need any extra help at being successful."
Conservative tax-cut backers disagree. Dan Mitchell, a senior fellow at the Heritage Foundation, a conservative think tank, said GOP tax cuts have the effect they do because that's the way the tax burden is tilted -- with upper-income taxpayers paying by far the biggest share of taxes. Mitchell noted that the wealthiest 10 percent of Americans pay more than 60 percent of all taxes, while most Americans pay only a tiny share.
Mitchell was referring to the nation's progressive tax code, under which higher-income people are taxed at higher rates than lower-income people. The House bill would cut personal income rates at all levels by 10 percent over the next 10 years.
If "the bottom 50 percent pay less than 5 percent of the tax burden, it is rather a mathematical certainty that any tax cut that you provide is going to be weighted toward the rich," Mitchell said.
"Why should the tax code punish success?" said Trent Duffy, spokesman for the GOP majority of the tax-writing House Ways and Means Committee. Duffy said the committee's tax-cut plan, which passed the House on a 223-208 vote yesterday, was premised on the theory that those who created the budget surplus ought to get it back in proportion to what they paid.
Whether the current tax-cut fight produces actual tax cuts later this year or just a vetoed bill and political stalemate, both sides plan to take the fight to voters in the 2000 elections, because it defines one of the most fundamental differences between Republicans and Democrats.
In his first year in office in 1993, President Clinton engineered a Democrat-backed tax plan that was almost exactly the opposite of what Republicans are pushing now. It raised rates on the top 1 percent to 2 percent of taxpayers and redistributed some of the proceeds to the working poor through an aggressive expansion of the earned-income tax credit.
Republicans have cast much of their tax-cutting activity ever since as an effort to undo Clinton's upper-income tax increases. Clinton and the Democrats, in turn, have leveled what amount to class-warfare attacks on the Republicans, accusing them of catering only to the rich.
Does that argument still work? Democrats are betting on it. Aggressive, class-warfare-style criticisms early this year helped scare Republicans away from their original plans to enact a pure, across-the-board tax cut, which Democrats said would have unambiguously favored the wealthy. Instead, both the House and Senate GOP plans now include proposals to ease the so-called marriage penalty and other provisions that offer targeted breaks to middle-income taxpayers.
At its heart, though, the fight is over whether voters will still respond to charges that tax breaks ought not to heavily benefit the rich, long a potent Democratic political weapon.
Conservatives say that won't work. "I believe this country is not envious of the rich," said Stephen Moore, director of fiscal studies at the libertarian Cato Institute. "Americans don't hate the yacht owner, they aspire to own a yacht."
And some analysts think the current economic boom might help the Republicans. "When times are good and unemployment is low and incomes are rising across all income levels, the American people aren't particularly exercised about redistribution through the tax system," said Robert Reischauer, a senior fellow at the Brookings Institution, a liberal-leaning think tank.
"It's more, `If I get mine, it's okay -- I don't care what the others get. . . . If the top 1 percent pays 32 percent of all income taxes, I'm not upset if 32 percent of the relief goes to that group,' " Reischauer said.