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The Democrats' tax cut gamble

IT'S TIME for Democrats to ask themselves Dirty Harry's piercing question. Do you feel lucky?

If the party is lucky, a year from now any alternative economic plan will seem preferable to George W. Bush's approach. But if the nascent economic recovery takes hold, it's likely that the best Democrats can expect in 2004 is a close, competitive election.

In such a contest, the nominee's position on taxes could prove critical.

On that issue, the Democratic field is divided between the hopefuls who favor total repeal of the Bush tax cuts and those who want to rescind the breaks only for upper earners.

The candidate most insistent about the need to reverse both the 2001 and the 2003 tax cuts is former Vermont governor Howard Dean, who says domestic priorities plus the need for serious pursuit of a balanced budget dictate total repeal.

Rep. Richard Gephardt also favors that course, saying the tax cuts haven't worked and the lost revenue would be better spent on extensive subsidies to promote near-universal health care.

The other serious candidates all favor raising rates for upper earners but retaining tax relief for the middle class. The disagreement extends beyond the efficacy of the Bush tax cuts to the very size of the reduction that the middle class received.

"What middle-class tax cut?" Dean asked in Sunday's Democratic debate in Detroit. "On the average, 60 percent of the people in this country got a $304 tax cut."

Averages, however, are deceiving, because any such average includes the quarter of households that pay little or no income tax -- and thus got little or no break.

Using that non-income-tax-paying cohort to reduce the size of the average tax cut is as misleading in its own way as the Bush administration rhetoric that factors in the reduction for upper earners in order to inflate the average value of the tax break.

So what does an accurate picture look like? Consider these numbers from the Urban-Brookings Tax Policy Center.

Fully 31.5 percent of joint filers (married couples) got a tax break of between $2,001 and $5,000, with an average tax cut $3,096. Another 18 percent of joint filers saw their tax burden fall by between $1,201 and $2,000, with an average reduction of $1,622. In all, 54 percent of joint filers got a tax break of between $1,001 and $5,000.

When it comes to families with children, 40 percent got a tax break ranging from $2,001 to $5,000 (average: $3,151), while another 30 percent got a tax cut of $1,201 to $2,000 (average: $1,624).

The accompanying chart shows the estimated benefit for families with one and two children at various incomes levels.

This much, then, is clear: though it's true that the Bush tax cuts delivered large benefits to the wealthy (who pay most of the income tax), the two tax-reduction packages also directed significant tax relief to the middle class. And that tax relief is even greater when it comes to families with children. Thus a candidate who favors the complete repeal of the Bush tax cuts finds himself advocating significant tax increases for millions of Americans who aren't likely to consider themselves among the very wealthy.

The Democrats, of course, have tried it both ways on taxes in the last 20 years. In 1984, nominee Walter Mondale announced up front that he intended to raises taxes if elected. While it's unlikely Mondale would ever have beaten Ronald Reagan, a popular incumbent surfing the wave of a recovering economy, his tax-hike pledge helped make his campaign a nonstarter.

In 1992, Bill Clinton ran saying he would reduce the deficit by increasing taxes on upper earners but promised a tax cut for the middle class. Although Clinton never really delivered on the tax-cut pledge, his promise nevertheless had considerable appeal on the campaign trail, letting him deflect incumbent George H.W. Bush's charge that he was an inveterate tax raiser.

There, then, are the facts and the history. So, Democrats, you've got to ask yourself, do you feel lucky?

Well, do you?

Scot Lehigh's e-mail address is

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