The real story on tax promises

Robert McIntyre calls himself "an equal-opportunity complainer." The director of Citizens for Tax Justice, a liberal think tank in Washington, grumbles that both the Al Gore and George W. Bush campaigns have misrepresented his statements analyzing their respective tax plans. This is especially relevant right now. The GOP campaign has moved away from the character issue to policy questions. And last week, Mr. Bush concentrated his attention on tax matters

Because of his tax expertise, Mr. McIntyre is often sought out by the media for comments. But just as movie advertisers pick out a favorable phrase from a critic's negative review, both campaigns use his remarks, shall we say, selectively.

In speaking on CNN a while back, McIntyre charged that the Democratic candidate's $500 billion tax plan includes too many targeted tax breaks. It would further complicate an already complex tax code.

At the same time, he said Bush's $1.3 trillion tax cuts would give most of the savings to the already rich and was so big it would bust the budget and create a deficit.

Guess which statement each of the two campaigns picked out for use?

More recently, McIntyre told the Associated Press that Mr. Gore had slightly misrepresented his breakdown of the average tax benefits in the Bush tax plan. Gore said a typical taxpayer would get 62 cents a day from the Bush cuts. Actually, it is $1.25.

Gore had used the number for those in the bottom 60 percent of the income ladder. This group includes a lot of poor people who pay little or no taxes, and thus are not "typical" or average. The $1.25 figure is for those in the middle fifth of the income spread.

In this case, the Bush campaign selected the misrepresentation squib. They are striving to show that Gore is misleading.

Bush flacks don't highlight the McIntyre calculation that $1 trillion of the $1.3 trillion of tax cuts over 10 years in the Bush plan go to those making $100,000 a year or more.

The Bush campaign has just come out with a 16-page booklet, "Blueprint for the Middle Class," which says the Bush plan would greatly benefit the middle class.

Peter Orszag, a University of California at Berkeley economist, says such "Bush rhetoric" is not valid, that his plan does little for those with middle or lower incomes.

Bush would replace the current five progressive income tax rates of 15, 28, 31, 36, and 39.6 percent with four rates of 10, 15, 25, and 33 percent. So most of those paying income taxes would get a break of some size.

The problem is that lower-income workers pay little or nothing in income tax. Such workers do, though, pay substantial Social Security payroll taxes.

It is the prosperous and the rich who pay the bulk of income taxes. So they benefit most from the Bush tax cuts. Bush argues that taxpayers should have more of the money they earn to keep and enjoy. The Texas governor criticizes the Gore plan for not giving a tax break to 50 million Americans. Gore aides claim the number is only 30 million.

McIntyre says no one knows precisely how many people will be left out by Gore's plan. But not many earning more than $100,000 would benefit. That's because the Gore plan is designed to help specific groups of taxpayers with moderate or lower incomes. But it is unknown how many will take advantage of his assorted tax goodies.

For instance, how many people will set up a voluntary tax-advantaged "Retirement Savings Plus" account under the Gore plan?

The Gore plan also gives breaks to those saving for college and those with day-care expenses or costs in looking after aging parents. Tax subsidies would help some without health insurance to buy it.

"The Bush plan leaves out a lot of people too" - about 35 million, says McIntyre. Most of these are people with low incomes or no earned incomes. Another 39 million would save less than $100 a year in taxes. Mr. Orszag complains that the big Bush tax cuts would be too stimulative for an already booming economy. But then many economists figure extra federal spending can also pump up an economy, and Gore's program includes more new spending than Bush's.

David R. Francis is senior economics correspondent of the Monitor.

(c) Copyright 2000. The Christian Science Publishing Society