Kerry Blasts Bush's Tax Cuts, Offers Own Plan

By Dan Balz
Washington Post Staff Writer
Wednesday, December 4, 2002; Page A04

Likely Democratic presidential candidate John F. Kerry yesterday slammed President Bush's tax cuts as "unfair, unaffordable and unquestionably ineffective" and said the best way to stimulate the sluggish economy is by shelving most future installments of the president's plan in favor of immediate payroll tax relief for all working Americans.

The Massachusetts senator, in a speech at the City Club of Cleveland, charged that Bush's economic priorities represent "tax giveaways that reward" wealthy Americans and big corporations at the expense of middle-class workers and small businesses. "The hard fact is that the new tax cuts proposed by the president don't make economic sense, and they're not fair," Kerry said, according to the text that was released in Washington.

In the speech, Kerry sketched out a broad economic blueprint for the country that calls for a series of short-term actions to invigorate the economy and longer-term measures, including tax simplification and closing corporate tax loopholes, that he said will restore fairness to the system.

Arguing that Bush's policies have turned "fiscal responsibility on its head," Kerry said the return of deficit spending in Washington means that "the largest cost of the Bush tax giveaway . . . will be paid for by our children" because of the need to borrow from Social Security and Medicare to pay the government's bills.

Although Democratic leaders avoided the issue of Bush's tax cuts during the midterm elections, a number of the party's prospective presidential candidates are on record opposing full implementation of that plan, particularly the income tax rate cuts aimed at the wealthiest taxpayers and the repeal of the estate tax.

But Kerry is the first of the presidential field to call for payroll tax relief, an idea both Robert Reich, the liberal former labor secretary in the Clinton administration, and the Business Roundtable have recently embraced.

Kerry called for a one-year holiday on payroll tax payments for the first $10,000 in income, which he said would mean a $765 tax cut for every worker, or $1,530 for a two-income family. Spokesman David Wade estimated the cost of the tax relief at $100 billion and said Kerry would pay for it from general revenue, not Social Security funds.

White House spokesman Scott McClellan tried to brush aside Kerry's criticisms of the administration, saying Democrats are "trying to resolve differences within their own party" on tax policy. He would not address Kerry's argument that payroll tax relief would provide quicker stimulus and more equitable distribution of future cuts than the remaining installments in the president's plan.

Other Kerry proposals for short-term stimulus include an extension of unemployment benefits due to run out at the end of the year for 820,000 families, an increase in the minimum wage and an expansion of the earned income tax credit for low-income working families. Kerry also recommended a tax credit to reward job creation, the elimination of capital gains taxes for what he called "investments in critical technology companies" and elimination of double taxation on dividends.

Longer term, Kerry said that eliminating offshore tax havens, corporate tax shelters and "corporate welfare" will ensure a tax code that is fair to all Americans. He also said he supports job training assistance for dislocated workers and "empowerment accounts" for low-income Americans.

Kerry's proposed tax cuts and criticism of wasteful corporate subsidies appeared to be an effort to head off Republican criticism that Democrats opposed to future phases of Bush's tax cuts actually favor raising taxes.

On Sunday, Kerry announced that he will file a presidential exploratory committee this week, with a formal declaration of candidacy likely in the coming months. He became the second Democrat, after Vermont Gov. Howard Dean, to take a formal step toward running in 2004.

Former vice president Al Gore, outgoing House Minority Leader Richard A. Gephardt (Mo.), Senate Democratic leader Thomas A. Daschle (S.D.) and Sens. Joseph I. Lieberman (Conn.) and John Edwards (N.C.) are expected to make decisions about whether to run by early in the new year. Civil rights activist Al Sharpton of New York also has said he will seek the Democratic nomination.