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Simon Considering Tax 'Surcharge' on Affluent

January 06, 1988|JAMES RISEN | Times Staff Writer

DES MOINES — Democratic presidential candidate Paul Simon said here Tuesday that, if elected, he might be forced, "as a last resort," to raise income taxes on high-income Americans in his first year in office in order to reduce the federal deficit.

The Illinois senator, who has been widely criticized for promising to balance the budget within three years without a tax hike, thus took a big step away from the other leading contenders in the Democratic race, who have uniformly opposed higher income taxes. Former Arizona Gov. Bruce Babbitt, trailing badly in the polls, is the only other Democrat who has been so openly willing to embrace higher taxes as a solution to the massive deficit.

In the text of a speech prepared for delivery here Tuesday night, Simon said that he would continue to resist any income tax increase that would affect middle-income Americans, but would be willing to impose a temporary income tax "surcharge" on individuals who make more than $100,000 a year.

Aims at Richest 1%

Simon said that the tax burden on the rich has declined so dramatically during the Reagan era that the wealthiest 1% of taxpayers can now easily afford to pay more.

"Stopping the federal deficit probably can be done without a tax increase, but I have pledged that we will stop borrowing from our children and grandchildren, and if a tax increase is necessary, it will not fall upon those already overburdened with taxes," Simon said.

Simon did not say how large a tax hike he might propose, but he offered as an example a 1% income tax surcharge on individuals who earn more than $100,000, and a similar surcharge on a family of four with income of more than $193,000 a year. He said that would produce $2 billion a year in additional federal revenues.

Simon had previously pledged to consider an income tax hike on the affluent, but until now, he had always indicated his tax increase would only come if his three-year plan to eliminate the deficit through other means failed. That plan calls for cutting military spending, pursuing an aggressive trade policy to spur exports and thus reduce unemployment, and making a consistent effort to lower interest rates.

May Not Await Results

While Simon continues to back that plan, he made it clear for the first time Tuesday that he may not wait to see if it works before raising income taxes.

"If, in my first year as President, when I examine the budget I inherit and find that a larger down payment (than expected) will be necessary to balance the budget, as a last resort I will not duck the hard choices on the revenue side," Simon said.

Along with a number of other candidates, Simon has also said he would support a range of other, less direct revenue-raising measures. He supports an oil import fee, for instance, and a higher excise tax on cigarettes.

Simon staffers downplayed the significance of Tuesday's proposal and insisted that Simon still believes higher income taxes can be imposed only if his other plans fail.

They added that the speech was an attempt to sharpen and re-emphasize Simon's image as the only true, old-fashioned liberal in the Democratic race.

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