Surprise, surprise. Former New Hampshire Senator Warren Rudman, John McCain’s national chairman, has hit back against George W. Bush’s tax-cut offensive. Rudman’s harsh remarks will play big, but won’t help McCain — in fact, he couldn’t have a worse surrogate on taxes.
Rudman has never been a friend of tax cuts, and has always been a root-canal austerity-minded policy advocate, obsessing over budget deficits throughout the 1980s and most of the 1990s. He has always had a gloomy view of federal finances specifically, and economic growth more generally — and has been consistently wrong on both counts.
As one of the co-chairmen of the Concord Coalition — whose spokesmen have repeatedly testified in Congress against tax cuts — Rudman has convinced McCain that the New Economy-federal surplus story is a fake. This will help lose the Republican presidential nomination for John McCain. Thanks a lot, Warren.
Today, Rudman argued that McCain’s tax plan would help working families, save Social Security, pay down the $5.5 trillion federal debt, and close $150 billion in corporate-tax loopholes. Rudman repeats the McCain line that the plan would allocate 62% of the non-Social Security surplus to save Social Security, 10% to Medicare, and 5% to paying down the national debt. He then charges that Bush’s plan would use “the entire surplus” to finance his tax cuts.
Rudman, of course, ignores the bottom-line problem with McCain’s approach, namely that there is virtually no growth-incentive impact. While Bush lowers the top personal rate from 40% to 33%, and the bottom rate from 15% to 10%, McCain leaves the top rate alone and makes no reductions in the marginal tax-rate structure. (McCain would widen the 15-percent bracket to prevent tax-bracket creep, but this would have only the softest incentive effect.) So under McCain, we will still have President Clinton’s 40% top rate and we will still have 5 tax brackets, so there is no flattening of the code, no simplification, and hence no incentive effect. More than any other point in this intra-GOP debate, this is the key issue: McCain departs from Ronald Reagan’s approach of lowering marginal tax rates to promote economic growth.
While McCain is absolutely right on the question of Internet taxes, the rest of his positions on taxes are riddled with problems:
In short, this is just the sort of plan Warren Rudman WOULD endorse. When George Bush said in the Michigan debate that his Texas tax cuts lowered the state’s spending baseline, he had the story exactly right. As Ronald Reagan taught us a long time ago, the best way to limit government, and curtail special interests, is to use tax cuts to starve the beast. Rudman didn’t like it then, so there’s no reason to expect he would like it now.