Bush Plans New Tax Cut for Election Year
The Bush administration, unfazed by aggressive Democratic opposition, is working on its fourth consecutive tax cut plan, which will be unveiled during next year’s presidential election campaign, according to sources close to the White House.
But unlike President Bush’s previous tax cut proposals, the White House plans to sell its election-year package as a narrowly targeted pension reform bill designed to help individual taxpayers by letting them stash thousands of additional dollars in tax-free IRAs, 401(k)s and other retirement accounts.
By targeting the tax relief to the growing investor class, the White House hopes to rally its conservative base by taking yet another significant step toward reforming the tax code, while sticking it to Democrats by daring them to oppose a plan that will benefit an estimated 70 percent of American voters.
“It’s an incredible political winner and it’s exactly what you need to talk to the investor class,” said Grover Norquist, the president of Americans for Tax Reform and a close confidant of senior White House political adviser Karl Rove.
Added GOP strategist Scott Reed: “Democrats will once again find themselves in a terrible defensive posture” because they will be forced to oppose a package that could be “wildly popular with working families and the entire investor class. That’s 60 million people.”
Although any new tax proposal from the White House is subject to change on Capitol Hill, Republican strategists believe the bill will be hard to stop in an election year.
Seven out of ten Americans who voted in the 2000 presidential elections had money invested in the stock market, mutual funds or retirement plans, according to data from the Voter News Service.
“Because there are so many people who now have IRAs or retirement plans of some sort, doing something that would help them grow their retirement funds is a positive,” said Republican pollster David Winston, a Roll Call contributing writer. “Passing something that will help with your retirement is not going to be opposed.”
Another White House insider said Bush aides hope the new plan with cause “Democrats’ heads to explode.” He added: “I don’t think they can handle another tax bill.”
Indeed, many Democrats in Congress and on the presidential campaign trail are expected to oppose any new tax relief plan — whatever it is called by the White House.
“How unseemly is it to be running a half-trillion dollar deficit and be proposing even more tax cuts for the well-to-do?” asked Dan Maffei, a spokesman for Rep. Charlie Rangel (D-N.Y.), ranking member of the House Ways and Means Committee.
Maffei and other Democrats believe the plan will only help the wealthy and a few middle class families because most Americans don’t have enough money to contribute the maximums to their current retirement accounts.
“The real political problem is that it would be yet another round of tax cuts that will go to the wealthy,” Maffei said.
The White House plan also could face some resistance among Congressional Republicans, where House GOP leaders have rallied behind a pension-reform bill championed by Reps. Rob Portman (R-Ohio) and Benjamin Cardin (D-Md.).
A spokeswoman for Ways and Means Chairman Bill Thomas (R-Calif.), said that committee Members have been focused on an international tax reform bill and have not turned their attention to next year.
But, she added, “We will be talking with the administration in the future about tax reform.”
Thomas supported the Portman-Cardin bill this summer when it was moved through the Ways and Means Committee during an infamous markup that ended with calls to the Capitol Police to restore order to the fractured panel.
The legislation, which would make it easier for companies and their employees to participate in retirement plans, now awaits a vote on the House floor.
Unlike the House legislation, the White House plan represents a more targeted approach that would dramatically expand tax-free savings and retirement accounts.
Although an internal debate continues inside the White House about the details of the plan, Republican insiders who spoke on condition of anonymity say it will track a Treasury Department proposal released earlier this year.
That plan would allow individual Americans to save up to $7,500 per year in tax-free savings and retirement accounts for a total of $15,000 a year. Treasury would put few limits on the accounts, permitting a family of four to save up to $60,000 a year, for example.
Investments in the accounts would not be taxed when participants cash out down the road.
By eliminating more taxes on savings, the so-called lifetime savings accounts (LSAs) and retirement savings accounts (RSAs) would move the U.S. tax code one notch closer to a consumption-based system — a dream of fiscal conservatives.
“This agenda is the logical step toward a reform of Social Security and the tax code,” said Reed, the Republican strategist.
To be sure, many conservatives — such as Senate Budget Chairman Don Nickles (R-Okla.) — continue to press Bush to run his reelection on a comprehensive tax reform bill.
But many senior Republicans say that could be foolhardy. “I don’t think that’s going to fly,” said Portman, close ally of the White House.