Issue & Debate: Taxes
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KWAME HOLMAN: Bob Dole has substantially staked his presidential campaign on tax reform, most notably on a promise to cut income taxes by 15 percent across the board.
SEN. BOB DOLE: My program follows two principles: No dollars should be taxed that would go to providing the basics for a family, No. 1, and, No. 2, no dollar should be taxed that would go to creating a job… Our pro-growth plan has a tax cut 15 percent across-the-board for every American taxpayer, 15 percent across-the-board. (applause) And if you have children under 18, a $500 tax credit, because we believe in families and we believe in children, and we believe in opportunities. Under our plan a family making $30,000, a family of four, will save $1261 on their tax bill, a lot of money to some here, no, not a lot of money–a lot of money to people making $30,000. This tax cut is designed for Main Street, not Wall Street.
KWAME HOLMAN: Not only would Dole cut personal income taxes, he also proposes giving families a $500 tax credit for each child under 18, cutting the top capital gains tax rate by half to 14 percent, and repealing the 1993 tax increase on Social Security benefits instituted by President Clinton. Dole estimates his tax package would cost the U.S. Treasury $551 billion over six years. Nonetheless, he vows to balance the federal budget by the year 2002.
SEN. BOB DOLE: I will reduce taxes while I’m balancing the budget. It can be done, and it will be done.
KWAME HOLMAN: Until this year, Dole’s major focus was on reducing the deficit, even if that meant raising taxes.
SEN. BOB DOLE: I have said for many years–and I’ll back it up with tough votes–that reducing the national deficit must be our No. 1 priority.
KWAME HOLMAN: For example, Dole voted in 1983 to increase the Social Security tax on all workers in order to save the fund from insolvency. But Dole insists his current push for tax cuts is more of a change of taste than of policy reversal. Still, the Clinton campaign is using Dole’s record on taxes against him.
COMMERCIAL SPOKESMAN: Dole voted to raise payroll taxes, Social Security taxes, the ‘90 income tax increase, $900 billion in higher taxes, and to help pay for his risky tax scheme, experts say Dole and Gingrich will have to cut Medicare, education, environment. Bob Dole, raising taxes, trying to cut Medicare, running from his record.
KWAME HOLMAN: But four years ago, it was Bill Clinton who used a promise to cut taxes on the middle class to help win his party’s nomination.
BILL CLINTON: If you want to have more equality, what you should do is lower middle class tax rates and increase tax rates on people who made all the money in the ’80s and whose taxes went down.
KWAME HOLMAN: Some of Clinton’s Democratic rivals mocked the promise as pure political pandering.
PAUL TSONGAS: The middle class tax cut did not come out of economists or people striving to compete. It came out of polling data because the polls show that was–that had support.
KWAME HOLMAN: But once Clinton secured the nomination in July of 1992, he began backing away from his tax cut promise in the face of a rising federal budget deficit. Clinton, instead, offered another plan dubbed “The New Covenant.”
BILL CLINTON: That’s what “The New Covenant” is all about–an America in which middle class incomes, not middle class taxes are going up, an America, yes, in which the wealthiest few, those making over $200,000 a year, are asked to pay their fair share, an America in which the rich are not soaked but the middle class is not drowned either.
KWAME HOLMAN: Within a year and without a single Republican vote, President Bill Clinton got Congress to raise the top income tax rate on the wealthiest taxpayers, increase the tax on a gallon of gas by 4.3 cents, and raise the business income tax rate, but there was no middle income tax cut.
SPOKESMAN: Ladies and gentlemen, the President of the United States, William Jefferson Clinton.
KWAME HOLMAN: This year, President Clinton proposed a modest set of new tax breaks including a $500 per child tax credit, a reduction in the capital gains tax on the sale of a home, up to a $1500 tax credit for the first year of college tuition, and a tax credit for businesses that hire welfare recipients. The Clinton package is estimated to cost $152 billion over six years.
PRESIDENT CLINTON: What I want to see us do now is to give the American people tax credits for child rearing. I want to see tax cuts for education. I want to see tax cuts for home buying. We can afford the right kind of tax cut, but we should not have a tax cut that is a big, across-the-board tax cut that goes to people like me who don’t need it, and that will increase the deficit again.
KWAME HOLMAN: But the Dole campaign has focused its attacks where they think the President is most vulnerable, on a slow-growing economy and the President’s 1993 tax hike.
COMMERCIAL SPOKESMAN: Under Clinton, stagnant wages, the largest tax increase in history, two incomes needed to make ends meet. Americans deserve better.
SEN. BOB DOLE: Make no mistake about it. My economic program is the right policy for America.
KWAME HOLMAN: Meanwhile, economists from the rival camps have sparred over how the Dole tax cuts would be paid for.
LAURA TYSON, National Economic Adviser: I cannot believe that you can balance the budget and we can give a $550 billion tax cut, 70 percent of which is paid for by just assuming economic growth and interest rate reductions. There’s no assumption that it will occur, and it seems to me, what are they going to cut?
JOHN TAYLOR, Dole Campaign: The key here is a growth program like Sen. Dole has put on the table, and the budget balance is a key part of his program, balancing the budget and reducing taxes, and the numbers do stand up.
KWAME HOLMAN: The tax debate is likely to continue throughout the campaign, including when the candidates, themselves, face off on Sunday night.