Editorial: Dole’s tax cut makes no sense

Tuesday, Aug. 6, 1996 | 11:59 a.m.

IT'S understandable that politicians want to offer tax cuts -- especially in election years. But Republican presidential candidate Bob Dole's offer to cut federal taxes by 15 percent to garner votes could have terrible consequences.

For a nation that can't balance its budgets, that copes with groaning trade deficits and a national debt of more than $5 trillion, a major tax cut seems risky at best.

The federal budget figures already are being fudged with billions of dollars in designated funds to present a rosier picture. Reducing revenue dollars could weaken the economy even further, send interest rates soaring and leave a miserable legacy for future generations. Dole defends his tax cut, saying the resultant economic growth should make up the difference for revenue loss, balancing the budget by the year 2002. Perhaps so, but if the economy sinks, the national debt would skyrocket.

Dole wants a 15 percent across-the-board tax cut for all Americans, along with a $500 per-child deduction that could drain the budget by an additional $800 billion. He also wants a cut in the capital gains tax and a simplified tax code.

Bread-and-butter issues, like tax cuts, play well to Americans who have historically voted their pocketbooks. Those same people have been living with declining buying power since the mid-1970s, but the principal culprits have been inflation -- driven in part by the national debt -- and the rising costs of Medicare and Social Security.

Dole and company are looking at tax cuts as a staple of American politics. But they might consider that imposing mild amounts of pain -- controlling federal outlays while preserving revenues -- would have a far greater benefit in the long run.

Not that Dole's ideas are all bad. Simplifying the tax code is long overdue and would garner strong support, more than a piecemeal approach to tax cuts. Reforms should remain revenue neutral at least until the bulk of the debt is wiped out. As the debt is reduced and the government is not expanded, substantial tax cuts would be possible.

We think Americans would be willing to trade a tax cut for a serious effort to reduce the debt and restore fiscal responsibility to the nation.

Dole's plan is the opposite way to do that. A major tax cut at this time makes no sense at all.