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Parties at Odds on Use of Taxes to Fight Deficit

January 10, 1988|JACK NELSON | Times Washington Bureau Chief

WASHINGTON — With taxes looming as a major factor in the 1988 presidential race, Republican National Committee Chairman Frank J. Fahrenkopf Jr. predicts that the GOP will adopt a no-tax-increase pledge. But Democratic National Committee Chairman Paul G. Kirk Jr. says the next President must seriously consider a tax increase as a means of reducing the federal budget deficit.

Although some Republicans as well as most Democrats say pressures for a tax increase next year will be enormous and three GOP presidential candidates have not ruled out new taxes, Fahrenkopf said most Republicans agree with President Reagan's view that taxes are not the answer to the budget deficit.

Sees Anti-Tax Plank

Fahrenkopf said he expects the GOP nominating convention in New Orleans, Aug. 15-18, to adopt a platform plank opposing any new taxes.

Vice President George Bush, the leading candidate for the Republican nomination, flatly rules out any tax increase but Senate Minority Leader Bob Dole of Kansas, who is running a strong second in national polls, has left the door open to the possibility of new taxes.

Kirk said the Democrats are not likely to "lead on taxes" when they adopt a platform at their July 18-21 convention in Atlanta, but "taxes will have to be seriously considered as a recognition of the problems that will be left by the debt and deficit of eight years of the Reagan Administration."

None of the seven Democratic candidates have ruled out a tax increase, and four of them have proposed specific new taxes. Former Arizona Gov. Bruce Babbitt is the most outspoken of the contenders in asserting the need for additional revenues to reduce the deficit and finance needed government services. He favors a phased-in 5% national consumption tax that would raise $220 billion over five years.

Fahrenkopf and Kirk, interviewed by The Times, indicated that they expect tax policy to become an increasingly important and controversial factor in the two parties' presidential campaigns.

"But taxes are not the answer to the deficit problem," Fahrenkopf said. "In fact, every time we've raised taxes over the last 20 years, spending has gone up. For every dollar in tax revenue raised, Congress has appropriated $1.57."

There might be "some appetite among Republicans for new taxes if the revenue could be directly linked to reducing the deficit but not with this Democratic-controlled Congress," he said.

GOP Candidates Accused

Kirk accused the Republican presidential candidates of "not being open enough about the problems this Administration will be leaving behind" and said that "each and every one of the Democrats has come to grips with the problems one way or the other, some more forthrightly than others."

"If the Republicans are going to say we'll never raise taxes," Kirk said, "then what's the future of this country? What's our future if we don't have adequate economic strength?"

Charls Walker, a leading Republican tax lobbyist who served as deputy Treasury secretary in the Richard M. Nixon Administration, agrees with Kirk. The next President, regardless of party, says Walker, "will have to be one tough son of a gun and will have to be willing to raise taxes--otherwise we'll be in danger of becoming a second-rate nation."

And former Democratic National Committee Chairman John C. White, also a Washington lobbyist, says he is advising his clients to prepare for tax increases next year because they are inevitable.

'Like a Pressure Cooker'

"After eight years of deficits and cutbacks on all domestic programs," White said, "this tax issue will be like a pressure cooker with the lid about to fly off. The White House theory has been that you could continue to cut such things as education and housing and medical care, but you can't without building up great pressure to finance additional services."

Along with Dole, two other Republican candidates--former Secretary of State Alexander M. Haig Jr. and former television evangelist Pat Robertson--have left the door open for new taxes and Robertson says he would consider increasing excise taxes on liquor and cigarettes, the so-called sin taxes. Former Delaware Gov. Pierre S. (Pete) du Pont IV and Rep. Jack Kemp of New York oppose any new taxes.

Bush and Kemp both propose a tax reduction that would benefit middle- and upper-income taxpayers who can afford investments. They favor cutting the capital gains tax rate from 28% to 15%. And Kemp also supports a freeze on imposition of a Social Security tax increase scheduled for 1989. Du Pont would consider additional tax cuts to stimulate the economy but declines specifics.

Oil Import Fees Favored

At least four of the Democrats--the Rev. Jesse Jackson, Rep. Richard A. Gephardt of Missouri, Sen. Paul Simon of Illinois and former Sen. Gary Hart of Colorado--favor import fees on oil, a move that polls show Americans support not only as a means of reducing the trade deficit, but also as a way of decreasing U.S. reliance on imported oil.

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