Bush did what he had to do in Iowa last night, which has been his pattern so far in this campaign. He doesn’t make any big mistakes, but he never delivers a knock-out punch either. Forbes did, however, cut into Bush, moving from 20 percent in the Ames straw poll last summer to 31 percent last night. Supply-side ideas are still alive and well. If Forbes wants to build on his momentum in New Hampshire, he needs to narrowcast his pro-life message and move to a three-point tax attack.
First, he should emphasize that he would drop the top rate from 40 to 17 per cent, a bolder cut than either Bush or McCain is offering. Second, he should hit with hard his plan to eliminate the capital-gains tax, which would enormously benefit investors. The prosperous denizens of New Hampshire are members of the new investor class, which neither Bush nor McCain is speaking to. Bush said on Evans & Novak last weekend that he dropped the idea of cutting capital-gains taxes because they would cost too much, when in fact capital-gains tax cuts have the most dynamic growth effect on the economy of any tax cuts. McCain, of course, is hopeless on cap gains. Finally, Forbes should emphasize that he has the only tax plan that reduces business taxes. The flat tax would allow immediate cash expensing (a 100 percent write-off for business investment). And the flat tax would drop the corporate rate from 40 percent to 17 percent. Neither Bush nor McCain has any business tax relief in their plans, and McCain actually proposes to raises corporate taxes.
These points make sense for Forbes because the flat tax does scare some middle class folks who don’t want to give up their home-mortgage and property-tax deductions. But if Forbes keeps going negative against Bush on taxes, he will end up hurting himself. He needs to be more a supply-side teacher than a Bush critic. Especially with Bill Clinton proposing roughly $25 billion of new spending even before Tuesday night’s State of the Union address, there’s an opening for Republicans to show how Clinton and Gore want to squander the surplus entirely on entitlements. Bush had it right in his Iowa acceptance speech: “The tax code takes in far more money than a limited government requires.”
It is McCain who is most vulnerable on this front. His tax-the-rich approach is not going to play in New Hampshire. It’s already hurt him, which is why he’s switching to the message that Bush is not fit to be commander in chief. If Forbes makes an effective tax-cut campaign in New Hampshire, he could actually defeat McCain and set the stage for a two-man battleground between himself and Bush.