GOP Eyes Tax Cuts as Annual Events

By Dana Milbank and Dan Balz
Washington Post Staff Writers
Sunday, May 11, 2003; Page A01

With the House's passage of a $550 billion tax cut plan, Congress is moving toward the third tax reduction in as many years for President Bush -- the same number passed in an entire generation before he came to office.

Yet the impressive trio of reductions is but a small step toward the administration's goal: nonstop tax cuts.

White House officials have told allies they will attempt a new tax cut every year Bush remains in office, and there is already talk of another round. The ultimate target -- overhauling the tax code and sharply reducing the size of the government -- may never be achieved. But the incremental steps in that direction help to keep the Republican Party unified and the president in an unending debate with Democrats over the tax burden on Americans.

Coupled with the war on terrorism, which also is likely to continue indefinitely, the constant pursuit of tax reductions has the potential to give U.S. politics a new rhythm. With Bush perpetually fighting for lower taxes and constantly battling terrorists -- he describes Iraq and Afghanistan as "battles" in the larger war -- there is little room for government to discuss new spending programs that Democrats want.

Paul Weyrich, a conservative with ties to Bush, said he was told at a White House meeting that "we intend to try to offer a new tax cut every year" -- a view top Bush aides have expressed to a number of business lobbyists. Grover Norquist, an anti-tax advocate who works closely with Bush aides, predicts: "You'll have a tax cut each year. I state it that way in all of the (White House) meetings, and I never get an argument."

But will the strategy continue to succeed?

Bush's determination to push multiple rounds of tax cuts -- this year's cuts of as much as $550 billion and 2001's $1.35 trillion cut sandwiched smaller investment tax breaks in 2002 -- comes in the face of evidence that Americans are at best only lukewarm in their support. The latest Washington Post-ABC News Poll found that, given the choice between tax cuts and spending on domestic priorities, the public favored spending by 67 percent to 29 percent. Asked to rank issues in order of importance, tax cuts ranked 10th.

Beyond the issue's appeal to Republican partisans, even Republican strategists question the political value and potency of the tax cut issue. "As a political tool, I don't think they do much outside of the base," said one strategist close to the administration. "The political importance of tax cuts is indirect. If they actually stimulate the economy, which is questionable, then they'll be helpful."

Said another strategist close to the president's team: "If we pass a tax cut and the economy doesn't improve and it gets worse, it's obviously problematic."

Still, Bush's tax cut strategy, by gradually reducing the supply of federal funds, has the potential to keep the GOP unified and Democrats on the defensive without frightening a cautious public. "A tax cut bill a year keeps the Democrats away," said Kenneth Duberstein, who was chief of staff to Ronald Reagan. "Americans like their changes in bite-size pieces and not in huge chunks."

Jonathan Baron, a Republican strategist tied to the party's conservative wing, said Democrats have shown no ability to turn Bush's support for tax cuts into a political liability. "Let's think of an election where a candidate's support for tax reductions was a political liability," he challenged.

Democrats acknowledged that there is no strong constituency opposed to tax cuts. In other words, Bush has found, for now, a relatively cost-free way to appeal to his base without inciting a revolt among independent voters or Democrats who might be attracted to him for other reasons.

"I think Bush has always used tax cuts to define Democrats as the party of government," said Bruce Reed, former president Bill Clinton's chief domestic policy adviser. "It doesn't do the economy any good, but it does Democrats some harm, " said Reed, who is now at the Democratic Leadership Council.

Democrats said the public could be stirred to oppose tax cuts if they could see the consequences of reducing the revenue available to the government for education or health care. In the states, where sharply declining revenue has forced substantial budget cuts, the public has become highly aware of the trade-offs, but in Washington, where there is no requirement to balance the budget, the pain is rarely felt as directly.

Mark Mellman, a Democratic pollster, said his party has not been effective in making an argument against Bush's tax cuts, a fact that was underscored by its losses in last year's midterm elections. "The argument we've been making is that it's bad for the economy, and people don't believe that."

Another Democratic pollster, Geoffrey Garin, agreed that deficits are "abstract" and produce little intensity among voters. Garin, however, said Bush's devotion to tax cuts could have political consequences. "The real downside for Bush is that his version of tax cuts continue to identify him as somebody who looks out for the interests of the wealthy as opposed to the middle-class or working-class Americans."

Even on the right, some social conservatives complain that the yearly tax cuts are distracting Bush from other important goals, such as judicial nominations. A potential warning comes from Weyrich, who, though a supporter of the tax cut, complains that the president's constant stumping for it is weakening his ability to draw the nation's attention to Democrats' unwillingness to confirm conservative judges. "You can't do more than one thing at one time," he said. "To push for a tax cut instead of these judges in my opinion is a mistake."

Business groups, meanwhile, doubt that tax cut momentum can be sustained. And even fierce advocates say cutting taxes will not work if government continues its inability to restrain spending and deficits continue to balloon.

Dan Danner, top lobbyist for the small-business group NFIB, said he is pleased by the administration's "continuing long-term interest and support not just for tax cuts but for tax reform." Yet he wonders how far it will go. "There always needs to be both the will to take it up on the Hill and a realistic opportunity for success," he said. Assuming a tax cut in each of the next five years is "not very realistic."

Similarly, Bruce Josten, a top official with the U.S. Chamber of Commerce, said business unity behind this year's tax cut is more an indication of the anemic economy than an endorsement of a year-by-year approach to tax cuts. Still, he sees evidence that the strategy is the best alternative. "I don't think politically this town is ready to get rid of the whole system and start over," he said. "It does work better this way, because we've gotten some things done. Dick Armey's approach -- get rid of the whole thing and replace it at once -- went nowhere."

That the yearly tax cuts are being pursued at all reflects important changes in Republican politics. With exceptions such as Sens. George V. Voinovich (Ohio) and Olympia J. Snowe (Maine), deficit hawks are almost entirely gone from the party. Of the 229 Republicans in the House, 216 have pledged not to raise taxes; forty-three of 51 GOP senators have done the same. Also, corporate lobbyists who once argued for stability in the tax code now favor a march toward simplification.

White House communications director Dan Bartlett said Bush's goal remains a streamlined tax code and a reduced tax burden. "Steps in 2001 and beyond have been in the right direction, and the president believes by reducing the tax burden more we can improve our economy," he said, adding that Bush also seeks a "fairer and simpler tax code."

Officially, there is no promise of a tax cut each year, and Bartlett said "a judgment will be made based on what the economy needs." Still, he endorsed the incremental approach. "The president also knows there are dramatic plans to achieve it overnight with a flat tax, and he's not looking at anything like that," he said.

Overall, the GOP is uncommonly unified by the tax cut strategy. While often divided on issues such as abortion and trade, Republicans have few divisions on tax cuts. Even religious conservatives are enthusiastic about tax cuts because, as conservative activist Gary Bauer put it, "people see high taxes as being a growing burden on the typical American family. To the extent social conservatives are trying to get kids into Christian schools, they want more of their money to spend."

In the past, the various industries and taxpayer groups squabbled over which tax cuts were the priority. But Norquist said Bush has avoided such fights by promising future tax cuts. The White House "made it clear that there was going to be a tax cut each year and that if you weren't in this year's tax cut, you would be in subsequent years' tax cuts," he said.

The result has been a near-unanimous coalition of business groups in support of Bush's tax cuts. Dirk Van Dongen, president of the National Association of Wholesaler-Distributors and a key White House ally, said that while he would like to see more major reforms, "there is something to be said in the legislative process for taking digestible bites and you work the hell out of that and come back and take another bite."

© 2003 The Washington Post Company