WASHINGTON _ The Republicans have their proposal for a
middle-class tax cut. Not to be one-upped, Rep. Richard Gephardt
of Missouri, the House Democratic leader, offered his plan
Tuesday. President Clinton will probably put forward his own tax
cut for the middle class in a speech tonight.
The proposals have these things in common: They are
frightfully expensive in terms of what they would cost the
government in lost revenue. They spread the money so thin that
they offer middle-income families less than what it costs to buy
a pizza a week. And most economists, regardless of their politics
or ideology, view such tax cuts as a lousy idea.
The last is not surprising. Proposals for a middle-class tax
cut are not about the economy. They are all about political
Take Gephardt's plan, which would reduce the taxes of all
households with annual incomes below $75,000. In a speech Tuesday
morning, he said, "We ought to be focusing help to the
hard-pressed, squeezed, middle-income families that are either
standing still or have been moving behind for the last 15
In other words, the swing voters who determine election
Neither Gephardt nor his staff would say exactly how much his
plan would cost or how large a tax break he was contemplating for
But say he decided to offer each family $300 a year, or about
82 cents a day. In 1991, the last year for which statistics are
available, there were 107 million taxpayers with pretax income
below $75,000, about 94 percent of all taxpayers.
If each one got a tax cut of $300, it would cost the
government $32.1 billion (107 million times $300), which is half
again as much as the government spends each year on Aid to
Families With Dependent Children, the main federal welfare
Gephardt said he would find spending reductions to offset the
tax breaks. But as has been the case with Republicans, he
declined to be specific.
The plan being pushed by Republicans in the House of
Representatives would offer each family with income below
$200,000 (99 percent of all taxpayers) and children in the
household a $500 tax credit for each child. That means that a
family with two children would have its taxes reduced by $1,000.
The 64 percent of taxpayers who have no dependent children would
Generally, the more income that taxpayers have, the more
likely they are to have dependent children. For instance, 55
percent of taxpayers with incomes from $100,000 to $200,000 in
1991 claimed at least one exemption for a dependent. Only 42
percent of the taxpayers with incomes from $30,000 to $35,000
claimed such an exemption.
The Republican staff of the House Budget Committee reported
last year that the plan would cost the Treasury about $20 billion
a year. IRS figures show that about 40 million taxpayers have
children and an income less than $200,000; 40 million taxpayers
times $500 comes to exactly $20 billion.
Some families, of course, have more than one child and thus
would get a bigger credit. …