Dole gives cautious nod to idea of a flat tax rate Senator helps unveil GOP's reform report; CAMPAIGN 1996


WASHINGTON -- Sen. Bob Dole waded into the flat-tax debate yesterday, for the first time endorsing in principle the idea of a single income tax rate for all taxpayers.

Or did he?

The Republican presidential candidate loaded up his support for the idea with so many qualifiers it was not immediately clear what flat-tax plan, if any, could meet them.

Less than a month before the voting begins in the 1996 nomination race, the flat tax has emerged as perhaps the hottest issue in the GOP debate -- thanks in no small measure to a multimillion-dollar TV ad campaign by its most ardent advocate, wealthy publisher Malcolm S. Forbes Jr.

Mr. Dole, speaking at the unveiling of a Republican tax reform report calling for a single tax rate, went further yesterday than his own advisers had predicted when he appeared to jump aboard the flat-tax bandwagon.

"It's going to be one of the major priorities in this year's election," said the senator, somewhat on the defensive on the issue, after a Forbes surge narrowed his lead in the polls. "Whether you're running for Congress, whether you're running for president, it's going to be a priority."

Mr. Dole -- who created the commission that wrote yesterday's report and got House Speaker Newt Gingrich to co-sponsor it -- said he has "no problem with a single rate, if it's fair."

He indicated that he would favor continuing the current deductions for home mortgage interest and for charitable contributions, which would be eliminated under some flat-tax plans -- including the Forbes proposal.

Mr. Dole spoke favorably of a new tax break contained in the commission report: one allowing taxpayers to deduct their Social Security contributions.

However, the senator said he would not favor a tax reform proposal that increased the deficit by $40 billion to $180 billion -- a clear reference to the flat-tax plans of another GOP contender, Sen. Phil Gramm of Texas, and of Mr. Forbes, which have those estimated price tags, respectively.

Finally, Mr. Dole said he would only back a plan that does not "shift the burden from the rich to the middle class."

It is not clear how, or whether, Mr. Dole differs from President Clinton on the flat-tax issue. A statement yesterday by Treasury Secretary Robert E. Rubin noted that Mr. Clinton, too, favors a simplified tax system that is fair to working families and doesn't increase the deficit.

"The tax commission appointed by the Republican leadership is vague on specifics, but it is clear that it offers no solution to how such a flat-tax proposal can avoid either raising income taxes on working families or exploding the deficit," Mr. Rubin said.

Mr. Dole, the Senate Republican leader, said the commission's report would be given a full hearing before the Senate Finance Committee, or a broader task force of senators that might include Democrats.

Scrapping current system

As introduced yesterday by commission Chairman Jack F. Kemp, the former housing secretary, the Republican proposal would scrap the current tax system and abolish the Internal Revenue Service. In its place, the Republicans would create a new, simpler system with a single tax rate (as opposed to four currently) and lower taxes for middle-income Americans.

The report did not specify what the rate might be, although Mr. Kemp said he hoped it would be no higher than 19 percent. The Forbes plan calls for a 17 percent rate; Mr. Gramm proposed a 16 percent rate.

According to Stephen Moore, a technical adviser to the commission, if all of Mr. Dole's preferences were included in a flat-tax plan, "you'd have to have a rate between 22 percent and 25 percent I don't think you could do all of those things."

Such a plan might also fail to meet Mr. Dole's goal of helping the middle class, since at those rates millions of middle-class Americans would wind up paying higher taxes than they currently do.

Mr. Moore, director of fiscal studies at the Cato Institute, said he advised the commission that for a flat tax to prove politically salable, the rate could not be above 20 percent.

Mr. Kemp, a longtime tax-cutting cheerleader whose ideas were the basis for the Reagan tax cut of the early 1980s, called the commission's report "a road map for a totally new tax code for America as we enter the 21st century."

Short on specifics

In reality, the 24-page document does not spell out how to get from here to there. It does not specify a flat-tax rate, nor the size of the "generous exemption" it proposes, nor the income level at which the tax would begin to be applied, all critical factors in determining the impact of the plan on individual taxpayers and on government revenues.

The report leaves open the question of whether the home-mortgage interest and charitable deductions should be retained but, reportedly at Mr. Dole's insistence, the commission emphasizes the importance of those politically popular tax breaks to "the values of the American people."

Also included in the report are a number of ideas favored by conservative Republicans, including "dynamic" scoring of future tax proposals, which attempts to predict their impact on the economy, and a requirement that any tax increase receive a two-thirds "super-majority" in Congress to gain approval.

Novel idea

Among its most novel recommendations is one for full deductibility of Social Security taxes, which currently are taxed as income even though they are taken out of wages before a worker receives his or her take-home pay.

The 14-member Republican panel, the National Commission on Economic Growth and Tax Reform, included two former governors, Carroll A. Campbell of South Carolina and Pierre S. "Pete" du Pont IV of Delaware; business and trade association executives; state officials, and former IRS Commissioner Shirley D. Peterson, now president of Hood College in Frederick.

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