Have We Got A Tax Cut For You!

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Gore's proposal would have a narrower impact, and is harder to understand, but count on this: those it would affect are solidly low- and middle-income people. Essentially, Gore would reward them with tax credits and refunds for government-approved good behavior: sending children to college, caring for an elderly relative or setting up certain kinds of savings accounts. It's social engineering via the tax code--something the Clinton Administration has been doing for years, and the sort of federal meddling that drives conservatives and libertarians crazy. It's a long way from the Bush approach of just giving people straight cash and trusting them to do with it as they please. (He offers a few tax credits, but they aren't central to his plan.) As such, the argument between the candidates over tax cuts reflects a fundamental difference in how Republicans and Democrats view the world. "Gore is focused on achieving social objectives, as opposed to tax relief," says Reischauer. "The goal of Bush's plan is tax relief, pure and simple."

There's no question that Bush's tax cuts would be easier for families to claim: everybody's basic rate would be 3% to 7% lower, so less money would come out of each paycheck. It's that simple. But Bush does nothing for the millions of poorer people who do not pay taxes because their incomes are so low. Under current tax law, a family of four doesn't owe taxes until it earns $24,900. Bush's plan doesn't try to help them make ends meet.

People who are climbing beyond the lower rungs of the economic ladder, however, would benefit from Bush's plan. It is designed to ease the transition for families moving just past the $25,000 threshold and into the realm of the taxed. Bush would also give vouchers to the parents of low-income students to help pay for private school.

If Bush's plan helps every taxpayer, especially the rich, Gore's is targeted at people with complicated middle-class lives. The jackpot winner under Gore would be a family making, say, $35,000 a year that has a child in day care (a tax credit of up to $2,160), another in college (a credit of up to $2,800), a sick mother in a nursing home (a $3,000 credit) and a retirement-savings plan (a federal match of up to $2,000). Gore would also expand the earned-income tax credit, a subsidy for people earning too little to be taxed, and eliminate the marriage-tax penalty for some couples. For the most part, nobody earning more than $100,000 a year would see relief from his proposals.

"These are tax cuts that, if you do exactly what Al Gore says--if you not only spend your money the way he wants but you finance that spending the way he wants--he'll give you some of your money back," says Larry Lindsey, the former Federal Reserve governor who designed the Bush proposal. Quips Bush spokesman Ari Fleischer: "Al Gore's tax cut is a tax cut for the rich. All the lawyers and the accountants who will have to fill out all those complicated forms will benefit the most."

To streamline and exploit the issue during his Democratic Convention speech, Gore tried breaking the tax cuts into the kind of currency all Americans can understand: diet soda. He warned that Bush's costly plan would deliver little to most Americans. The "average family," he said, would wind up with only enough additional money to buy an extra Diet Coke a week.

But Gore misspoke, as Bush's people were quick to point out. He meant to say that each family could buy an extra Diet Coke per day. And even that was slightly off, according to the group that crunched the numbers Gore used, the nonprofit Citizens for Tax Justice. The Diet Coke-a-day number actually applies to the bottom 60% of U.S. taxpayers. But many of those taxpayers don't pay any taxes at all, which skews the numbers in Gore's favor.

The real average family, the middle 20% of taxpayers making between $24,000 and $39,300, would do better than Gore suggested. They would be able to use Bush's tax cut to treat themselves to two cans of Diet Coke a day. Refreshing, perhaps, but not life changing.

Maybe that's why, ever since Bush introduced his plan late last year, public reaction has been medium to cool. Poll after poll has shown that a large tax cut is not high on Americans' lists of priorities. Bush's response to the public's reluctance has not been to back away from his idea; instead he just keeps reiterating its benefits and feasibility. "Maybe I didn't explain what I was trying to explain very well," he said in New Orleans on Thursday, before trotting out a middle-class family that would profit from his plan. "Let me start over." It is an axiom of politics that the side in trouble always uses as its first excuse that it has got a communication problem, not a substance problem. So Bush figures that if he could just explain his tax cut better, the voting public would like it more.