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Archive for Sunday, October 27, 1991

LOCAL CONGRESSMEN BERATE PROPOSALS TO CUT FEDERAL TAXES

October 27, 1991

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Two Kansas congressional members say they don't think much of tax cut proposals for the middle class revealed last week and they don't think the ideas will get very far.

And a pair of Kansas University professors say the tax cut plans seem motivated more by politics than by any hope of improving the economy.

"Not that everybody wouldn't like a tax cut, but we seem to be in a bidding war here in the Senate on who can promise voters the better tax cut proposal," U.S. Sen. Nancy Kassebaum, R-Kan, said in a telephone interview. "I'm quite alarmed we're not presenting a realistic scenario."

U.S. Rep. Jim Slattery, D-Kan., called the tax cut plans "irresponsible."

"What you're seeing in Washington these days is a political stampede on both sides of the aisle to give the people what they want, and that is tax cuts," Slattery said in a separate phone interview. "But I'm just very concerned about what effect this is going to have on the deficit."

TAX-CUT fever was ignited last Sunday when Sen. Lloyd Bentsen, D-Tex., chairman of the Senate Finance Committee, proposed a five-year, $72.5 billion tax cut for middle-income families.

Sen. Daniel Patrick Moynihan, D-N.Y., Wednesday renewed his nearly 2-year-old call for a cut in the Social Security payroll tax. A Republican, Sen. William V. Roth Jr. of Delaware, countered with a proposal that includes a 3 percent reduction in income tax rates.

Kassebaum said the announcements of the various tax cut plans were "most unfortunate" because news of the proposals effects the economy. For example, the news caused mortgage interest rates to rise last week, she said.

"I think that this should be of great concern because it indicates the markets are uncertain about what we're gong to do," she said. "I think by the bond markets' adverse reaction to it, certainly it's going to mean we'll have inflation. And I think it adds to the budget deficit, which is already a disaster."

SHE SAID THE proposals follow a "bizarre logic" because they promise tax cuts but base them on deeper defense cuts, which can seriously erode jobs, she said.

"What we need right now is a healthy, growing economy and we need lower interest rates," she said. "It's got to be a time to be willing to be honest with the public about what some of our options are. . . . I'm not one to put any rosy scenario on our economy."

Kassebaum said the tax cut proposals have further damaged the image of Congress.

"I am frustrated because the public confidence in government is so low right now," she said.

She said congressional members need to spend more time working on a long-term solution to the economy.

Slattery said he wouldn't support tax cuts that would increase the $350 billion deficit.

"I think we should reopen the budget agreement that was entered into last fall," Slattery said. "We should make sure the deficit reduction we thought was going to be achieved when we entered into it last fall is going to be realized."

SLATTERY SAID if the tax cuts are going to be financed by spending cuts, he wants to see the cuts put into law first.

"I want to make sure whatever is done is truly deficit neutral and will over a number of years reduce the deficit," Slattery said.

Walt Riker, Sen. Bob Dole's press secretary, dismissed Bentsen's proposal to offer $300 tax credits for children under 19 and tax deductions for individual retirement account contributions of up to $2,000.

"That one is probably not going anywhere. It has a lot of promises, but it brings more deficit spending and it guts defense," Riker said.

Riker said Dole has been meeting this week with several people in the Bush administration, including Secretary of State James Baker, Richard Darman, head of the budget office, and Chief of Staff John Sununu.

"They're putting together a more realistic package that would help jump start the economy and have it targeted short-term so we don't get back into deficit spending," Riker said.

RIKER SAID the Democratic tax-cutting plans are apparently efforts to woo mainstream voters.

"They're all born-again conservatives," Riker said. "Everyone calls themselves fiscal conservatives. But if you look at the programs, they have not changed a bit."

Burdett Loomis, a Kansas University political science professor, said talk of tax cuts is political.

"All I can say is you're talking politics, not economics," he said. "It has everything to do with politics, not economics. . . . We may get a tax cut out of this. But in terms of its impact on a recession, when there's a $300 billion deficit, that's like spitting in the wind."

Anthony Redwood, director of the KU Institute for Public Policy and Business Research, agrees.

"IT SEEMS THE main motivating force for this is more political than economic," he said. "If they did do something, it would probably be too little, too late."

Redwood said he views the economy as "a fully loaded 747 getting ready to take off over the Pacific . . . . It's having trouble lifting off the tarmac."

"Most observers think we are at that stage where we are starting to come out of the recession," he said. "If you accept that notion, then the need for a fiscal kick start isn't there."

He said that because of the budget deficit, tax cuts would have to be modest. So would the impact on the economy, he said.

"If the consequence of tax cuts is to increase the deficit further, then the overall consequence could be more harmful than good," he said.

Redwood said if tax changes were to be made, he would prefer to see the capital gains tax removed from small businesses to encourage entrepreneurship.

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