GOP SHOULD SWING THE AX AT SPENDING, NOT AT TAXES.(MAIN)

Albany Times Union (Albany, NY) March 24, 1995 Byline: JAMES K. GLASSMAN WASHINGTON Republicans should immediately shelve their plans to cut taxes this year and instead devote all their energy to cutting spending.

Don’t get me wrong. I think taxes are too high. They now consume a bigger share of the average family’s expenses than housing, food, clothing and medical costs combined. High taxes are a drag on economic growth and a license for government to increase wasteful spending. And our current tax system bears much of the blame for the shamefully low U.S. savings rate.

For these reasons, tax reform is a necessity, and a flat tax or a consumption tax is almost certainly the best answer. But such changes can’t possibly be approved in 1995 or even 1996. Americans need a full-scale debate, preferably during a presidential campaign.

Instead of building support for major reform later, the Republican strategy this year is to enact a typical Christmas-tree tax bill, festooned with baubles for businesses, investors, retirees and middle-class families. President Clinton introduced his own, smaller tax-cut plan in February.

Tax relief is normally a crowd pleaser, but not today. On fiscal matters, Americans seem to have just one thought in mind: Balance the budget. Only 13 percent of respondents to an NBC-Wall Street Journal poll said taxes were the “most important economic issue facing the country,” while nearly three times as many said it was the deficit. go to website christmas tree tax

Politicians are at last starting to notice how the public is ordering its priorities. On Capitol Hill last week, I found no members who were truly enthusiastic about tax cuts. Economists aren’t clamoring for them either. With gross domestic product rising nicely, the cuts aren’t needed as a short-term economic stimulus; on the contrary, they’ll probably boost inflation. web site christmas tree tax

So the logical conclusion is to forget taxes entirely for this year. Unfortunately, the Republican Contract with America has a mind of its own.

Last week, the tax-relief bill passed the Ways and Means Committee on a party-line vote. The bill is scheduled for a vote in the House next week, and already dozens of Republicans are asking House Speaker Newt Gingrich to scale it back.

If the tax bill passes, it goes next to the Senate Finance Committee, whose chairman, Sen. Bob Packwood, R-Ore., has indicated that his panel would give it a frosty reception. Packwood is a big thinker who almost certainly would prefer reforming the whole tax system but only after spending is cut, a step he believes will lead to lower interest rates as the government’s borrowing requirements fall.

Either a consumption tax or a flat tax would remedy two of the greatest problems of the current system that it’s too complicated and that it imposes marginal rates so high they discourage investing. The flat tax also has an amazing appeal that many politicians have overlooked: Americans at all income levels believe it’s more fair than what we have now; they suspect that fat cats use loopholes to avoid their fair share.

Kellyanne Fitzpatrick of the Luntz Research Cos. of Arlington, Va., the firm that helped House GOP leaders draw up the Contract With America, says that Luntz has conducted polling nationwide and focus groups in three cities, and the results are clear: “The flat tax is a big home run for everybody.” Gingrich would be nuts to ignore that kind of sentiment. He should postpone the tax-relief vote indefinitely, concentrate on spending cuts and lay the groundwork for Republicans to run on a flat-tax platform next year unless Clinton is clever enough to beat them to it.

James K. Glassman writes regularly on financial affairs for The Washington Post.