Dean may support middle-class tax cut
After months of touting his plan to repeal all of President Bush's tax cut, former Vermont governor Howard Dean is moving toward embracing a tax relief package for middle-income Americans, which would amount to a major revamping of a centerpiece of his Democratic presidential campaign.
Dean's action comes after his team of economic advisers privately gave him a "unanimous" recommendation to back a middle-income tax cut to offset the increases that would come with repealing Bush's plan, a top campaign official said.
The economic team has been especially concerned that Dean's proposed repeal of the Bush cuts has enabled critics to accuse him of supporting what amounts to a $2,000 tax increase on families earning between $73,000 and $145,000.
Some advisers worried that stance could be politically fatal in the general election if Dean is the Democratic nominee.
Yesterday, Dean signaled that he is heeding his team's advice to provide some form of middle-class tax relief, saying during an Iowa debate, "Ultimately, we will have a program of tax fairness for middle-class people."
A top Dean official said yesterday that the campaign has made a "strategic" decision for Dean to refrain during the primaries from revealing details of a proposal to trim middle-class taxes, preferring to announce it during the general election.
Dean, like all the Democrats running for president, has assailed the Bush tax cuts as favoring the wealthy. But unlike some of his rivals, including Senator John F. Kerry of Massachusetts, General Wesley K. Clark, and Senator Joseph I. Lieberman of Connecticut, Dean has said he would not preserve any of the reductions.
But privately, Dean's economic team has been urging Dean for weeks to pair his proposal for repealing the Bush tax cuts with tax relief for the middle class.
Dean Baker, a member of Dean's team of economic advisers, said that during the campaign strategy sessions he attended, the team agreed on that course of action. Baker said he is surprised that Dean hasn't already made such an announcement.
"Certainly when we had discussions, everyone seemed to be coming down the same way," he said.
He added: "In setting up a clear opposition to Bush, the easiest thing to say is, `I'm repealing the tax cut.' But I think it wasn't thought out carefully, not just for the politics, but for the policy. That wasn't what you wanted to do."
Alan Blinder, a Dean economic adviser who talks with campaign staff on a daily basis, said the discussions have centered on "softening the blow to the middle class" that would occur with the repeal of the Bush cut.
Harlan Sylvester, who chaired Dean's council of economic advisers in Vermont during all 11 years when Dean was governor and also talks regularly with the campaign, worries that Dean will be "bombarded" by Republicans unless he amends his position.
"They are going to be saying, `You are going raise taxes by $1 trillion.' I wouldn't think that is good," said Sylvester, who supports Dean's candidacy.
"If he gets the nomination, then obviously we will have to talk about it and see," Sylvester added. "All I am saying he is not an ideologue, he is pragmatic. I think the problem is, a family of four making $70,000 a year, their taxes would increase something like $2,300."
According to the Labor-backed Citizens for Tax Justice, the Bush tax cut amounts to $2,015 in 2005 for a family with an income between $73,000 to $145,000. Thus, the Dean plan would effectively increase taxes on that family by $2,015 in the first year of a Dean presidency if he were elected and immediately repealed all the cuts.
In 2005, the Bush cuts are to save $971 for a family with an income between $45,000 to $73,000; $563 for a family with an income between $28,000 to $45,000; $371 for a family with an income between $16,000 to $28,000; and $77 for families earning less than $16,000. The wealthiest get the biggest windfall, with a family earning more than $337,000 saving $41,264.
Dean has contended that the Bush cuts don't significantly help most Americans. Speaking Monday in Charles City, Iowa, Dean pointed out that the Bush tax cuts save $112,000 for millionaires, but for 60 percent of Americans save an average of only $304.
In yesterday's Iowa debate, Lieberman chastised Dean for his vague statement about providing middle-income tax relief. "I don't know what he means when he says ultimately we're going to have a tax reform program," Lieberman said. "We're running for president now. We have to tell people what we want to do."
Jeremy Ben-Ami, Dean's policy director, said Dean has always called for making the tax code "fairer and simpler for working families. No question he is 100 percent committed to the notion that there will have to be some steps taken to make the tax code fairer. He has not at this point elaborated on that. He has left it at that."
The question now, Dean advisers said, is exactly what form the tax relief proposal might take. It is most likely to be a targeted income-tax reduction for families with children, they said.
None of the advisers suggested Dean would be able to restore all of the Bush tax cuts for the middle class, noting that Dean needs funds to cut the deficit and pay for his health care plan. But most of the advisers interviewed for this story said they would advocate some kind of middle-income tax relief package.
For now, the Dean campaign says the repeal of all of the Bush tax cuts would pay for deficit reduction and to provide health care for the uninsured. A Dean campaign ad unveiled this week said says Dean "will repeal the Bush tax cuts to provide health insurance for every American."
On his website, Dean addresses the issue this way: "Many have questioned the political wisdom of challenging the president on politically popular tax cuts. I believe, however, that given a choice between having health insurance or keeping all of the Bush's tax cuts in place, most Americans will choose health insurance."
Dean's tax policy so far hasn't been a major problem for him in the Democratic primaries, although candidates such as Kerry and Clark have frequently criticized Dean for wanting to raise taxes on the middle class.
Kerry, for example, has proposed repealing the tax cut for those earning more than $200,000 while retaining all of the tax cut for middle-income households.
Clark on Monday proposed eliminating income taxes for those earning less than $50,000, and cutting taxes for those in higher middle-income brackets, while repealing the tax cuts for those earning more than $200,000.
Michael Kranish can be reached at kranish@globe.com. Glen Johnson of the Globe staff contributed from Iowa. 