REPUBLICAN presidential candidates can’t get elected without owning the tax issue. So far, the current crop is giving it away.
A huge reason for Ronald Reagan’s popularity was his cutting of all income-tax rates and ending of “bracket creep,” in which inflation pushed earners into higher tax groups. Congressional Republicans promised a tax credit for children while sweeping the 1994 elections. In 2000, George W. Bush promised to expand that tax credit and to reduce income taxes.
Yes, the top Republican contenders for 2008 are promising to keep all of Mr. Bush’s tax cuts. But the Democrats are not threatening the child tax credit or Mr. Bush’s reductions in the lower-level income-tax rates. Those issues are off the table.
What Mitt Romney and Rudy Giuliani — who have made the most detailed remarks on taxes of the top-tier candidates — are really saying is that they will make sure that taxes on capital gains, dividends, estates and high earners will stay low. Not many middle-class taxpayers will benefit directly from any of those policies.
Mr. Romney adds that he will try to cut the corporate tax rate, which his adviser Glenn Hubbard calls “a drain on competitiveness.” Many of our trading partners have cut their corporate taxes, and more and more conservatives want the United States to follow suit. Apparently they haven’t been listening to their own speeches on free trade. Companies compete. Countries, however, are not engaged in a zero-sum contest where one nation’s gain is another’s loss. Cutting corporate tax rates may or may not be a good idea, but we don’t need to make it a priority to preserve our competitiveness.
Both Mr. Romney and Mr. Giuliani speak vaguely about making sure the alternative minimum tax doesn’t affect any more middle-class families. That is a step in the right direction. But it isn’t a tax cut.
Mr. Romney has also proposed an initiative to make the return on middle-class savings tax-free. It may also be a step in the right direction, but it’s small change. The primary focus of the Romney and Giuliani tax plans remains high earners.
What would be a serious middle-class tax cut? One answer is to expand the tax credit for children. But none of the candidates is proposing to do so, or any other big tax relief for regular folks. You might think that Mr. Giuliani would want to do everything he can to appeal to social conservatives short of actually becoming one himself. But why should he offer a pro-family tax cut when even the hard-core social conservatives in the race aren’t interested? Mike Huckabee wants a national sales tax and Sam Brownback wants a flat tax. Either proposal would increase taxes on a lot of middle-class families.
The Republicans in Congress are no better. For much of the right, the great passion of the moment is to make sure that the carried interest at hedge funds is taxed at what look an awful lot like preferential rates. For years, liberals have said that Republicans talk about “family values” but won’t do anything to meet the economic needs of families. Right now, on taxes, that charge hits home.
Two ideological misconceptions underlie the party’s lack of imagination. First, Republicans worry that taking people off the income-tax rolls, as an expanded child credit would do, would make voters think big government is free and turn to the Democrats. But there’s no real evidence for this. Besides, parents are likely to be future-oriented voters, and they will realize that they will be paying higher taxes again once their children have grown up.
Second, Republicans believe, in general, that the tax code should generate its revenue in a way that does the least damage possible to the economy. So they seek tax reforms that cut taxes on investment returns and thereby increase economic growth. What they ignore is that we overtax investments in children, too. Parents make financial sacrifices to produce the next generation of taxpayers, who will pay for everyone’s retirements. Yet the tax code does too little to recognize parents’ investments.
True, an expanded tax credit for children wouldn’t increase economic growth. Growth is good, and more growth is better. But present tax rates are perfectly compatible with healthy long-term growth. There is no pressing need to bring them down to improve growth.
A few conservative strategists have designed tax reform plans that modestly cut corporate tax rates and simplify the tax code while also helping families. (One idea is to make up the lost revenue by bumping affluent childless people into higher tax brackets.) So far, the candidates have not been interested.
As the Republican Party has gotten more socially conservative, its voter base has become lower in income. Many of the working-class social conservatives on whom the party relies are parents trying to make ends meet, or young people who want to start families but have financial worries. They have no particular attachment, or hostility, to free-market principles. A Republican Party that found a conservative way to meet their economic needs would both hold and expand its base.
Ramesh Ponnuru is a senior editor at National Review.
Taken from: (http://www.nytimes.com/2007/09/20/opinion/20ponnuru.html?_r=1&ref=todayspaper&oref=slogin).
