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The Politics of Selling Tax Breaks for the Wealthiest December 22, 2002 By DAVID E. ROSENBAUM WASHINGTON - The Bush administration is torn between what some officials believe is good tax policy and others fear is bad politics. At issue are tax cuts for the rich. Many conservatives have long despised the progressive income tax, which taxes the wealthy at a higher rate, holding that it is unfair, unnecessarily complicated and economically inefficient. They argue that the tax burden falls so heavily on so few people that it is difficult to mobilize political support for overhauling the tax system. "It not only makes it more difficult to get people to want to abolish the income tax, it also makes it more difficult to give tax relief to anyone," said former Representative Bill Archer, a Texas Republican who was chairman of the House Ways and Means Committee until he retired from Congress last year. In the next few weeks, President Bush will propose a package of tax cuts, convinced that lowering taxes is the right tonic for whatever ails the economy. No one in the know will say exactly what the president plans. But the best guess is that he would eliminate or sharply reduce the income taxes individuals pay on stock dividends, move to 2003 the upper-bracket rate reductions scheduled for 2004 and give companies more generous breaks for investments in equipment. Mr. Bush is also expected to propose making permanent the tax cuts enacted last year. These cuts, including abolition of the estate tax, are scheduled to expire in 2011. Democrats are looking for every opportunity to portray the president as the patron of fat cats. And they pounced on a passage in a speech this month by R. Glenn Hubbard, the chairman of the President's Council of Economic Advisers, maintaining that "the increasing reliance on taxing higher-income households and targeted social preferences at lower incomes stands in the way of moving to a simpler, flatter system." The administration's strategy, declared Democratic Representatives Charles B. Rangel of New York and Robert T. Matsui of California in a letter to colleagues, is "to raise taxes on lower- and middle-class families in order to finance deeper tax cuts for the wealthiest Americans." Mr. Hubbard declined last week to respond to repeated inquiries about whether he in fact supported increasing taxes on low- and moderate-income families. But Claire Buchan, a White House spokeswoman, dismissed the notion that this was the president's position. A more senior White House official said, "It is preposterous to think that the president would stand up and say, `I want to put more people on the tax rolls.' " Yet, as soon as the president's plan is unveiled, Washington will be deluged with statistical tables, showing that the big winners would be the richest people in the country. Using data compiled by the Congressional tax staff and the Internal Revenue Service, Citizens for Tax Justice, a liberal research institute, found that the wealthiest 1 percent of taxpayers - those with annual incomes over $356,000 - would receive about half the revenue the government would lose next year if dividends went untaxed and 45 percent of all the money from accelerating the rate cuts. The 80 percent of households with incomes below $73,000 a year would get less than 10 percent of the new tax breaks. These findings are not surprising. After all, the richest 1 percent has 18 percent of all the pretax income and pays 36 percent of all personal income taxes. But studies like this reinforce the public perception that the Bush administration favors the rich. A New York Times/CBS News Poll in October showed that 55 percent of those surveyed held this view, while only 25 percent thought the administration treated everyone equally. It was one of few instances where the national poll found that Mr. Bush was seen in a negative light. To make his tax-cut proposals more politically palatable, people who follow administration policy closely say the president will probably offer additional tax cuts that would make his proposal look less lopsided in the statistical analyses. One possibility is another rebate like the one taxpayers received last year, but limited to lower-income families. Another is a temporary suspension of the Social Security payroll tax for workers. A third is an additional tax break for retirement savings by people with modest incomes. Robert M. Teeter, a Republican pollster, said politicians in his party tended to be overly anxious about how their tax cuts benefited the wealthy. Surveys show, Mr. Teeter said, that ordinary people are not so much jealous of the rich as they are hopeful of reaching the point where they, too, can get tax relief. But officials who have worked on tax matters inside previous Republican administrations said enormous attention was paid to the political effect of the statistics showing winners and losers from tax policy. "The straitjacket of distributional tables," said Michael J. Graetz, who was the top tax official in the president's father's administration, "often distorts good tax policy." In any case, no one expects Mr. Bush to offer a proposal next year for replacing the progressive income tax with another tax system. But few doubt that such a system is his ultimate goal. The challenge will be finding one that is not skewed toward the rich. Last week, three prominent conservatives - Jack F. Kemp, the 1996 Republican vice presidential nominee; Stephen Moore, president of the Club for Growth, a conservative political action committee; and William Kristol, editor of the Weekly Standard - urged the president to support a reduction in the payroll tax. "If Bush goes for tax cuts that, fairly or unfairly, can be accused of being skewed to the rich and to investors, that is a fight they will lose," Mr. Kristol said. http://www.nytimes.com/2002/12/22/weekinreview/22ROSE.html?ex=1041551380&ei=1&en=95751c899ae629fa HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact [EMAIL PROTECTED] or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to [EMAIL PROTECTED] Copyright 2002 The New York Times Company <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! 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