How to handle tax cuts: a primer - campaign issues - Winning Tips for Democrats in '98

It used to be said that death and taxes were the two great inevitabilities of life. To that list can be safely added proposals for tax cuts by Republicans running for office. Given the likelihood of GOP tax cut campaign proposals - no matter what the fiscal circumstances - it behooves Democratic candidates to have consistent messages and strategies prepared well in advance of election season.

The original GOP tax "rebellion" (which helped inspire Ronald Reagan's 1980 platform) was Howard Jarvis' property tax cut initiative in California in the late 70s. With state treasuries currently holding over $14 billion in budget surpluses nationwide and the federal government about to run its first surplus since the '60s, the attraction of tax cuts twill be irresistible to Republicans at federal and state levels. In fact, Jarvis style property tax cuts are back in vogue. Gov. George W. Bush's failed plan in Texas and Jim Gilmore's politically successful plan in Virginia are recent examples.

Hot on the heels of Republican wins in '94, state legislative elections in Virginia became the staging ground in '95 for an early Republican tax offensive to realize the vision of the Contract's "crown jewel." Governor George Allen (R) proposed deep tax reductions which threatened education funding. This offensive was roundly repulsed in the General Assembly and at the polls in '95.

The next major engagement occurred in the '96 presidential election. In the face of persistently daunting polls, Dole unveiled a plan to enact a dramatic 15 percent "supply-side" income tax cut. Despite initial acceptance, voter cynicism and preference for a balanced budget allowed Clinton to defeat Dole handily at the polls. Here are a few important lessons for Democrats to keep in mind as this year's elections draw near:

#1: Tax cuts are not Republican silver bullets and don't inevitably define or win elections.

In fact, surveys repeatedly show majorities of voters nationwide expressing preferences for budget balancing and education, crime, and health care programs to tax cuts. If Democrats have a compelling agenda, they can defuse voter enthusiasm for lower taxes. Otherwise, voters will take the money. Democrats must answer the question: why not cut taxes?

#2: Do not introduce yourself to toters as someone who wants to raise their taxes.

The most recent electoral engagement was fought to an apparently successful Republican conclusion in the Virginia gubernatorial race of '97. Democrat Don Beyer's campaign serves as an object lesson in how not to handle a Republican tax gambit. When he announced for governor, Beyer made statements in an interview which were interpreted as willingness to raise taxes to achieve policy goals. He immediately retracted the statement. But the damage was done.

#3: Avoid letting your opponent set the agenda.

Beyer next pursued a policy of criticizing Republican Jim Gilmore's proposed car tax cut as fiscally unsound - a judgment which was also reached by a group of GOP Governor Allen's own economists and various legislative research groups. After several weeks in this mode and with Gilmore's plan getting a lot of press, Beyer panicked and made a surprise announcement in a July debate that he had his own targeted car tax cut plan. The problem with this was not merely that it constituted a blatant flip-flop - it was early enough in the campaign that a well disciplined message strategy could conceivably have overcome that initial handicap. The problem was that after the flip-flop, Beyer put himself in a self-defeating position of appearing to grant both the desirability and feasibility of a large personal property tax cut and, having done that, set out to conduct a fight on his opponent's ground.

#4: Don't bring a knife to a gun fight.

Having ceded the agenda and (effectively) the feasibility of his opponent's plan, Beyer engaged the enemy with inferior firepower. It became a debate over who had the most seductive tax cut. The general role of thumb in these matters is that, everything else being equal, voters will prefer a larger tax cut to a smaller one.

#5: Exercise message discipline.

With the election a few weeks out and polls showing an increasing Gilmore lead, Beyer reverted once again to attacking Gilmore's tax plan as fiscally irresponsible. Post-election polls suggest that this tactic worked to some extent. But it was too little, too late. Interestingly, polling shows that throughout the election, it was education, not taxes, that stood at the top of the public's agenda.

In a post-election survey, fully 71 percent of voters agreed that "Virginia faces a real crisis in terms of road construction and investments in education, and I would rather deal with these issues than cut taxes fight now." This is an amazing finding when you consider that this poll was taken within 24 hours of Gilmore's election, which was ostensibly based on the strength of his car tax plan. If Beyer had stuck to his original message, he may well have prevailed.

#6: Republicans do not hold a copyright on tax cuts: fight fire with fire. Current fiscal realities and budget surpluses allow candidates of both parties to propose tax cuts and address spending priorities. A tax cut can be a formidable weapon in Democratic hands as well. While the federal tax system is modestly progressive overall, most state tax systems are significantly regressive taking larger percentages of their revenues from low and middle income families. The Republican tendency to propose tax cuts with an upward distributional bias often presents an opportunity for Democrats with more populist tax cut plans.

An excellent test case is about to be played out in Georgia where a Republican gubernatorial candidate is attempting to rerun the Virginia governor's race with a copycat car tax cut. However, Georgia Democrats, under the leadership of incumbent Gov. Zell Miller, have their own tax cut proposal to almost double the personal exemption on state income taxes. Previously, Georgia Democrats had eliminated the sales tax on groceries.

Populist, progressive tax cuts stack up nicely against typical Republican proposals and can enable Democrats to neutralize the Republican tax gambit.

Christopher Marshall is senior analyst at Cooper & Secrest Associates, a Democratic polling firm.

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