Tax cuts big issue in party platforms

    88

    JERRY M. GOWE

    Politicians know voters hate taxes, and that’s why both President Clinton and Republican presidential contender Bob Dole made tax cuts part of their platforms in this year’s elections.

    Clinton. In 1993, Clinton pushed higher income taxes on the wealthy and a 4.3 cent-per-gallon increase on gasoline tax. The purpose for these taxes was $110 billion in tax cuts, including an eventual $500 tax credit for pre-teen children, college tax breaks and expanded use of IRAs.

    This would increase capital gains tax for some investors, reduce it for home sales, offer business tax breaks for hiring welfare recipients and raise some corporate taxes. Clinton also expanded earned-income tax credit for working poor but did not deliver the promised middle class tax cut.

    “I have proposed a program of tax cuts for working families that focus on education and child-rearing, and are clearly within our ability to balance the budget so we can continue to keep those interest rates down and the economy growing,” Clinton said.

    Dole. Voted for the 1990 budget deal raising taxes in careers, but also includes tax cuts. The proposals include $548 billion in tax cuts over three years, including a 15 percent cut in all income tax rates, cutting in half capital gains tax rate and $500 tax credit for children under 18. This would let people direct $500 of their income taxes to charities that fight poverty.

    He also endorsed a constitutional amendment that would require a three-fifths majority vote in Congress to approve tax increases. In addition, he backs expanded use of IRAs, and has pledged no increase of income tax rates.

    “I have one big plan: To give you back more of your hard-earned money and more of your freedom, because you can run your own life better than any government bureaucracy ever can or ever will…. This is a Main Street, not a Wall Street, tax cut,” Dole said.

    Ron Worsham, a BYU professor in the School of Accountancy, said students must remember that either tax plan would have to pass through Congress before anyone would see the benefits of a proposed tax cut. He also said Dole’s proposed tax plan would be especially difficult to pass through Congress.

    Worsham also said lowering taxes is politically difficult, and students should think about the future and not just the present.

    “From a student’s vantage point, the big issue is how is a deficit going to affect you further on down the road? If it is not controlled today there will be a higher tax burden for you in the future. If taxes go too far down, 20 or 30 years down the road we will be paying the price,” Worsham said.

    Lower taxes are the central issue in Dole’s push for the presidency. Dole is promising the biggest tax cut in a decade — a 15 percent across-the-board reduction in tax rates.

    Clinton has answered with a more modest package of tax decreases designed to help people pursuing post-secondary education and saving for retirement.

    The price of the Dole plan makes some economists and others doubt its viability. They say Dole, if elected, probably wouldn’t be able to deliver the promised cuts because he wouldn’t be able to pay for them.

    Dole has said his cuts will partly pay for themselves by boosting economic growth. He estimates the economic activity created by his cuts would generate $150 billion in new tax revenues, or about a third of the total price tag. The remaining $400 billion would come from a variety of cuts in government spending.

    Worsham said the main difference between the two plans is that the magnitude of the Clinton tax plan isn’t so great.

    Both Clinton and Dole propose tax breaks that will reduce interest on student loans and offer discounts for parents helping to pay tuition.

    “From a student’s stand point that’s going to be very important. After you graduate, it’s going to lower your after-tax cost of repaying the loan, if those proposals go through,” Worsham said.

    Worsham said students should remember that these are election promises being made by candidates seeking office.

    “You kind of have to take these promises that are made with kind of a jaundice eye because history would say that what’s promised now doesn’t always come to pass tomorrow,” Worsham said. “Clinton promised a pretty substantial tax cut the first time around. Once he saw how big the deficit was, he wasn’t able to cut taxes after all.”

    Print Friendly, PDF & Email