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Democrats Seek to Widen Sales Tax Attacks

Congressional Democrats believe that tax reform, despite its conceptual allure for many voters, could be a dark horse issue that enables the party to pick off, or perhaps salvage, key House and Senate seats.

Bolstered by surprisingly effective campaign attacks in the South Carolina Senate race, Democrats are zeroing in on proposals for a national sales tax, which some Republicans have floated as a possible replacement for the income tax if structural tax reform is taken up by Congress next year.

Although the legislation is idling on Capitol Hill, certain Republicans’ stated support for a tax on consumption — a policy that critics have described as regressive taxation — has been portrayed by Democrats as a red flag warning of controversial GOP plans for the 109th Congress.

This week, the Democratic staff on the Ways and Means Committee distributed a 25-page document on the national sales tax, subtitled, “The Price is Too High.”

“Most Republicans may not want to talk about it before the election, but if they win, you better believe this will come up,” said Rep. Charlie Rangel (D-N.Y.), the ranking member on Ways and Means, in a statement that accompanied the report.

President Bush has made tax reform a centerpiece of his second-term agenda if he wins, and House Majority Leader Tom DeLay (R-Texas), a co-sponsor of the national sales tax bill, has indicated that he would make reform a top priority as well. The president has not indicated a preference for any one idea over another.

The attack has hit the mark most strikingly in South Carolina, where even Republican strategists concede that Senate candidate Inez Tenenbaum (D), the state superintendent of education, has closed the gap with her GOP rival, Rep. Jim DeMint, one of the co-sponsors of a national sales tax bill on Capitol Hill.

Tenenbaum’s campaign itinerary now includes regular visits to supermarkets, where she seeks to convey the costs that the consumption tax would impose on household staples such as a gallon of milk, as well as television spots from her campaign and the Democratic Senatorial Campaign Committee driving home that message.

Elsewhere, Buncombe County Commissioner Patsy Keever (D) has taken a similar tack in her uphill bid to unseat Rep. Charles Taylor (R-N.C.), a co-sponsor of main sales tax legislation in the House.

And Erie County Comptroller Nancy Naples, the Republican nominee for the New York 27th district’s open seat, faced attacks this week from her opponent over the issue. In Naples’ case, she was attacked simply for bringing another co-sponsor of the sales tax legislation, Rep. Phil Gingrey (R-Ga.), to the district for a campaign event.

The Democratic attacks have their source in a bill, H.R. 25, that was introduced last year by Rep. John Linder (R-Ga.) and has collected 53 Republican co-sponsors. (A 54th co-sponsor is Minnesota Democrat Collin Peterson.)

Democratic campaign strategists have used the list of co-sponsors as a guide to GOP incumbents who might be vulnerable on the tax issue.

Of the co-sponsors, only six are in House races considered competitive by both parties. That list includes Taylor and Reps. Pete Sessions (Texas), Randy Neugebauer (Texas), Bob Beauprez (Colo.), Steve Pearce (N.M.) and Max Burns (Ga.).

South Carolina has been the laboratory where the potency of the issue is tested.

“It is absolutely a kitchen table, pocketbook issue that hits voters where they live,” said Tenenbaum spokesman Adam Kovacevich.

He added that the issue has helped Tenenbaum close the gap with DeMint because “it is reflective of a larger theme, which is that he embraces ideas that sound good in Washington but hurt South Carolina.”

Not so, counters DeMint campaign manager Terry Sullivan.

“The reason this issue is effective here is because we have been demagogued on it and outspent three to one,” explained Sullivan. “It’s how loud you are yelling the message, not how powerful the message is.”

Brad Woodhouse, a spokesman for the DSCC, said his party believes the attack can be widened beyond South Carolina.

He suggested GOP Reps. Johnny Isakson (Ga.), David Vitter (La.) and Richard Burr (N.C.) — as well as former Rep. Tom Coburn (R-Okla.) — have all at one time or another supported the national sales tax idea though none are co-sponsors of Linder’s legislation. All four are seeking open Senate seats.

Dan Allen, a spokesman for the National Republican Senatorial Committee, strongly disagreed about the message’s potential. The sales tax issue “is not transferable because it is not going to work in even one state,” Allen said. “Democrats are not going to pick up votes over a Republican if the issue is taxes.”

A spokesman for the National Republican Congressional Committee said the issue hasn’t raised a blip on their political radar.

“In competitive races, I haven’t seen it at all,” NRCC spokesman Carl Forti said.

Forti said any suggestion among Democrats that the national sales tax is a live issue on the campaign trail is part of that party’s effort to “nationalize” the election even though “there are no national trends.”

Democrats have gone to some length to tease out the post-election intentions of the president and GOP leaders on Capitol Hill.

One round of attacks was set off by a recent Bush statement that the sales tax “could” be a useful reform. The Democrats have also highlighted page 272 of a recent book by Speaker Dennis Hastert (R-Ill.). On it, he calls the national sales tax an “interesting proposition” and “worthy of consideration.”

DeLay spokesman Jonathan Grella acknowledged that the Majority Leader considers the national sales tax his “favorite” alternative to the current tax system. But Grella indicated that Republicans are set to consider a raft of reform plans, not limited to the sales tax.

The House Republican Conference plans to convene a meeting Thursday to begin an internal debate over how the party should approach tax reform.

“The voters will not be fooled by Democrats who feign interest in protecting their wallets,” Grella said. The Democrats “are as much of an impediment [to taxpayers] as the [Internal Revenue Service] itself.”

Democratic Congressional Campaign Committee Chairman Robert Matsui (Calif.) said he was pleasantly surprised by DeLay’s willingness to push the national sales tax issue.

“We now feel that this is going to be on the agenda for the Republican House in 2005,” said Matsui. “We think if this thing gains some roots in the Republican Conference, and hopefully they keep talking about it, then we will have an opportunity to talk about what Members are supporting it.”

The national sales tax would impose a levy — perhaps as much as 23 percent — on all retail purchases. Critics contend that the tax would impose a disproportionately greater burden on lower- and middle-income wage earners, who tend to spend a greater share of their income on purchases.

Proponents suggest that retail goods themselves would likely be less expensive without the compliance costs and other burdens created by the current tax code and then passed along to consumers in the cost of everyday products.

The administration plans to convene a bipartisan commission after the election to juggle different ideas and reach consensus on the most suitable plan.

“It’s basically over the next few months that this will occur,” said Treasury Department spokesman Robert Nichols. He pointed to an ongoing department study of the Alternative Minimum Tax as one of the preliminary steps toward reform that is already being taken.

The AMT is the minimum rate applied to wealthier taxpayers regardless of deductions and exemptions.

Despite strategic weaknesses the Democrats believe they have unearthed with the national sales tax, they are nevertheless wary of pushing too hard that they make the party appear to be the defender of an unpopular tax regime.

Indeed, just this year some party leaders identified tax reform as a potential treasure trove for party message builders, citing the mounting complexity of the current system. House Minority Whip Steny Hoyer (D-Md.), among others, convened a working group to study ideas and build resistance to GOP proposals, while Rep. Chaka Fattah (D-Pa.) put a plan on the table that would impose a fee on nearly all transactions.

“If you frame the issue as a fairer, simpler code, it’s a home run” with voters, one senior Democratic leadership aide said, citing internal party polling.

Alluding to their GOP opponents, the aide added, “I’m sure they did the same polling we did.”

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