WHO SAYS THE Republican congressional leadship is brain-dead? Well, sure, a lot of peoe do, but the point is: those people are wrong.
How wrong was made evident on the weekend of July 13. Pessimists may have thought it a particular low point in the conservative revolution. Seven months into an election year, Bob Dole had as yet declined to unveil an economicgrowth package of tax cuts or, for that matter, any kind of package of anything. The most important recent accomplishment of the Republican Congress had proved to be an increase in the minimum wage. And Trent Lott, in his fourth week as Senate majority leader, had taken to the floor of the Senate to complain that Democrats were being just unbelievably uncooperative.
Newt Gingrich, however, chose the same weekend to announce that the congressional leadership was at last going to push aggressively for a bold new initiative: an enormous, across-the-board, growth-oriented, supply-side tax cut for . . . the 290,000 registered Democrats in the District of Columbia.
Of course, the tax cut will include the District’s 26,000 registered Republicans too, along with its 46,000 independents, unnumbered Wobblies, and any other Washingtonian who files a federal tax return. But the most striking feature of the initiative is that it’s for the District and the District alone.
Gingrich made his announcement on This Week with David Brinkley: “We’re looking very seriously — Trent Lott and I met Friday with Jack Kemp to discuss this — at a very dramatic tax change for the city of Washington to literally create an incentive for people to move back into the city.” Note the special Gingrichian inflections: not just a dramatic tax change but a very dramatic tax change; not merely to create an incentive but to literally create an incentive. He means business.
As does Lott, who endorsed the measure the following day. The Senate version of the tax cut will be introduced this week by Republican Connie Mack of Florida and Democrat Joseph Lieberman of Connecticut. Mack has been promised accelerated hearings on the bill. The House version was introduced on April 15 by D.C. delegate Eleanor Holmes Norton, who can claim paternity, or whatever, for the whole idea. After Gingrich’s announcement, House hearings on Norton’s bill were pushed up to this week as well.
The House and Senate versions are almost identical. Both would greatly increase personal exemptions: $ 15,000 for a single filer, $ 25,000 for an unmarried head of household, and $ 30,000 for married joint filers, regardless of children. All income beyond that would be taxed at a flat 15 percent. Taxes on capital gains for assets in the District would be eliminated. (The House bill applies this provision only to District residents; the Senate bill would eliminate cap-gains taxes on District assets for anyone who owned them, wherever he lives.) Tax rates on business income would not be cut, and the deductions for charitable contributions and mortgage interest would remain. Both bills contain a “hold-harmless” provision, which would allow District residents to choose which tax regime they would like to be taxed under: the current IRS regime or the new Republican-sponsored flat tax.
The premise for so radical a reform seems inarguable: The nation’s capital is, as currently governed, a dump. The most visible symptom of this — not counting the litter, the bums, the murder rate, the dilapidated schools, the cratered streets, and the felonious mayor — is a steady flight of middle- class residents, now mostly black, to the suburbs. And the flight is accelerating. In the first five years of this decade, the District lost more taxpayers than during the 1980s.
But did the tax burden drive them out? Income tax rates in the District are indeed outrageous, among the highest in the country. The top marginal rate of 9.6 percent kicks in at $ 20,000. But in neighboring Prince George’s County, Maryland, to which many of the District’s middle-income taxpayers have fled, the overall tax burden is even higher. It seems clear that something other than high tax rates is pushing away the middle class — it might just be the litter, the bums, the murder rate, the schools, the streets, and the mayor. And in any case, the inordinately high rates paid by District residents are imposed by the District itself. The federal tax burden is the same for the District as for anywhere else in the United States.
Unless, of course, the Republican leadership has its way. The Republicans who are most enthusiastic about the D.C. tax cut are ardent supply-siders, including Mack, Gingrich, and Kemp. They see the District of Columbia as a supply-side laboratory: A flat tax can reaffirm to a skeptical world the magical effects of marginal-rate reductions. “Once America sees what economic growth through a lower income tax rate and a zero capital gains tax rate can produce,” Mack says, “the rest of the country will demand the same opportunity for more jobs, stronger investment, and greater hope for the future.”
The D.C. tax cut owes its current boomlet to Kemp. “This is Jack’s deal, all the way,” says an aide to the Republican leadership. “It’s all about his close relationship with Lott and Gingrich.” Kemp’s influence as a party leader has suffered over the last year, with his indecision about running for president and his late-hit endorsement of Steve Forbes over Bob Dole in March. But it’s still true that the leaders of today’s Republican Congress — Lott, Gingrich, Mack, majority leader Dick Armey — have been Kemp proteges since the early and mid-80s.
They remain loyal to him and meet with him frequently. At the most recent meeting, on July 12, Kemp plugged the Norton bill hard. He had spent the better part of 1995 selling Norton on the flattax idea. She originally balked, worrying that a flat tax might benefit the rich, increase property values, encourage “gentrification,” and other horribles. In the end the plan was fashioned so it would appear sufficiently “progressive,” meaning few business incentives were included.
Kemp stoked Gingrich and Lott’s interest throughout the spring and finally brought Lott together with Norton for a private meeting two weeks ago. When Lott, Gingrich, and Kemp met on July 12, Lott agreed to co-sponsor Mack’s bill in the Senate and Gingrich agreed to push the tax cut publicly. Two days later, on the Brinkley show, Sam Donaldson asked him about the District’s multifaceted problems and the speaker jumped right in. Literally.
The leadership’s enthusiasm has not been matched among the rank and file. Harrumphing privately, many Republican lawmakers wonder why, given their failure to cut the taxes of their own constituents, they should now give a hefty tax cut to Ralph Nader, Kay Graham, and Al Hunt, among other lucky D.C. taxpayers.
There are more mechanical concerns as well. “I’ve never seen a revenue bill brought up this late in the session,” says another leadership aide. “And I’ve never seen a tax bill endorsed by the leadership before [congressional staff] has done any economic analysis on its effects.”
All these concerns loom in the imposing figure of Bill Archer, chairman of the Ways and Means Committee. Ways and Means, of course, has the constitutional responsibility to originate any revenue measure. And Archer doesn’t like this one. In unusually colorful language, he called the D.C. tax cut “silly.” (For Archer, that’s colorful.)
Still — and remarkably — some staffers in the leadership say the bill has a good chance of passing, even in this session, even by September. “Better than 60 percent” are the odds given by one staffer involved. Norton herself is similarly sanguine. She’s made it clear that she’s ready to move on to her next project: full political representation for the District in Congress. It is the new progressive dream: representation without taxation.
by Andrew Ferguson
