ROBERT MacNEIL: Good evening. The voters of Missouri said a resounding "no" to an increase in their gasoline tax yesterday, and were immediately credited with joining what`s being called the national tax revolt. Whether Missourians thought they were doing anything so dramatic, that little bit of news won`t be lost on the Congressmen sweating out a tax bill. Today the House Rules Committee argued through a long, sultry Washington day trying to decide which of a wide array of proposed tax cuts to bring up for a floor vote. More on that in a moment.
Ever since Californians passed the Jarvis Amendment in June, mandating a huge cut in property taxes, the idea of voter resentment over high taxes has become the political wisdom of the year. Most of the politicking swirls around how much to cut taxes, not whether they should be cut, in a time of high deficits and inflation. Tonight, with the aid of some new polling data, how the public feels about tax cuts, and how Congress is reacting to that feeling. Jim Lehrer is off; Charlayne Hunter-Gault is in Washington.
Charlayne?
CHARLAYNE HUNTER-GAULT: Robin, what the tax revolt fever has wrought on Capitol Hill is a rash -- a rash, that is, of tax cut proposals and. unlikely coalitions. The President`s original goal of reforming the tax: system and making if fairer has fallen into a quagmire of conflicting economic, political and social aims. Initially the President wanted to eliminate tax loopholes that more often benefit the rich, and he wanted to increase the tax on capital gains. The President`s tax proposal called for stimulating the economy with $25 billion in tax cuts, but once his bill got to Congress the reforms all but bit the dust. In opposition to the President`s proposals, conservative Democrats joined Republicans on the House Ways and Means Committee and approved a much smaller tax reduction of $16.3 billion. This bipartisan coalition also called for a decrease in the capital gains taxes. That move so enraged the President that he labeled it a "windfall to millionaires" and promised to veto the measure. That in turn prompted other Democrats to produce a compromise that provides greater relief to low-income and middle-wage earners, but he also reduced capital gains taxes. But wait -- there`s more to come. Some other Republicans, in an unusual turnabout, have still another proposal, and that is to cut taxes by one third over the next three years. And believe it or not, there`s one more proposal, and that`s essentially to do nothing, or more specifically, to extend the present tax rates for another two years. Meanwhile, today a congressional rules committee voted that the full House will begin debate on four proposals tomorrow. Robin?
MacNEIL: With talk of tax revolt flying thick and fast this political year, we wanted to anchor it in a little fact. How angry is the public? What is the pressure for large tax cuts? What consequences would they be willing to accept? Burns Roper heads the Roper Organization, a national opinion research firm. He`s recently completed two surveys of public opinion on taxes, before Jarvis and after Jarvis, to measure whatever snowball effect that California vote may have had. Mr. Roper, in your first survey, before the Jarvis vote, a survey you did for H&R Block, can you tell us from that, how angry is the public, how do you measure it, and is revolt an accurate word for their mood?
BURNS ROPER: Well, Robin, we gave people a list of fifteen issues and asked them which they thought needed the most attention, and tax reform came in third. We also asked a question that I frankly don`t know quite how to assess; we gave people a thermometer and we said if zero is perfectly satisfied and ten is anger over the tax system, where would you place yourself, and the public placed themselves at 6.5. Now, that`s well below ten; on the other hand it`s over five. So, somewhat angry, I would think.
MacNEIL: Have you ever found an issue in recent years in which it got closer to ten, on which they were really angry?
ROPER: No, I don`t think we`ll really know how to assess that question itself until we`ve asked it a second time and see whether it goes up or down or hovers at that level.
MacNEIL: Would you yourself believe, interpreting your own results, that the word revolt is an accurate word for the mood?
ROPER: I would have said, based just on the H&R Block study, which was done before the Jarvis Amendment, that it was overstatement, that there wasn`t that. There was great concern about inequities, but not about tax cut.
MacNEIL: Now, taking that concern about inequities, were the voters more concerned about making the system fairer or more concerned about getting their own taxes down?
ROPER: Far more concerned about making the system fairer. That`s what ranked third. Tax cut ranked about tenth on the` list of national concerns.
MacNEIL: That`s interesting. Let`s look at three of your specific findings after Jarvis. Was the California vote for an across-the-board property tax cut an isolated phenomenon? Roper. asked how voters nation wide would vote if they were offered a Jarvis-type amendment -- that is, for property tax cuts -- in their own community. Fifty-six percent said they would vote for it. Twenty-five percent said they would vote against. Nineteen percent didn`t know. Roper found that the belief that property taxes were excessive jumped nationwide after the Jarvis vote, not surprisingly, perhaps. Before Jarvis, thirty-two percent thought property taxes were excessive; after Jarvis, thirty-six percent thought so. But the really striking jump came in attitudes to the federal income tax, something Jarvis did not cover. Before Jarvis, twenty-six percent of the American people thought federal income taxes excessively high. After Jarvis, forty-one percent felt that way, a jump of fifteen percentage points.
Mr. Roper, how do you explain that jump? Can you?
ROPER:Well, I frankly was surprised by it.The fact that the "excessively high" figure didn`t go up that much -- went up a little -- on property taxes and on some of the other taxes didn`t surprise me; but it did surprise me that it went up more than fifty percent, in terms of the increase, on federal income tax. And incidentally, that`s "excessively high"; that doesn`t include the "somewhat high", which is still another percentage. I think probably what happened is that the Jarvis Amendment focused people`s attention on taxes, and as they thought about it they said, "Wait a minute. I pay a lot more in income taxes than I do in property taxes; those are the ones that are really high." I can`t explain it any other way.
MacNEIL: Does your data show that people think that taxes are too high for everyone across the board?
ROPER: No; they don`t. They show that people primarily think taxes are too high on the middle income, but that needs to be defined. We got that kind of a result a year ago when we did the Block study. This year we asked people, what`s middle income, and there was the real surprise to me. Middle income is $20-40,000, in the public`s thinking. Below twenty is low, above forty is high.
MacNEIL: Do the latest figures indicate that voters are growing interested more in cuts now than in reform, since Jarvis, with that big jump in the concern about the federal income tax?
ROPER: I can`t say that; I don`t have a direct comparison. I would think that -- my judgment would be that there is less of a disparity between sentiment for reform over cuts than there was. Probably reform was still number one.
MacNEIL: I see. If you had to crystalize all this, how would you describe the message on federal taxes that voters seem to be sending to politicians?
ROPER: It`s very clear from some of the other questions we asked that it`s an anti-government kind of a sentiment, a feeling that money is being wasted, that there are a lot of programs that aren`t getting anywhere, that there are too many bureaucrats spending the dollars without accomplishing ends. It`s that kind of a message.
MacNEIL: Well, thank you. Charlayne?
HUNTER-GAULT: It`s probably a safe bet to say that any taxpayer would welcome a tax cut, but there is some debate over whether the benefits would be merely personally enriching or would also extend to the general economy. Still, an impressive number, forty-eight percent of people polled, think a one third cut in all taxes would be a good thing. Twenty-one percent think such a cut would be bad. And twenty-one percent think it depends on which taxes were cut. One man who favors and proposes a one third cut in taxes is Senator William Roth, a Republican from Delware. Senator Roth is a member of the Senate Finance Committee and co-sponsor of the Kemp-Roth bill. Senator Roth, what do you say to your critics who say that your bill, in light of Jarvis, represents crass political expediency which is really aimed at appeasing and appealing to white, middle-class, suburban voters?
Sen. WILLIAM ROTH: Well, in the first place, our legislation precedes the Jarvis-Gann vote. I`ve been for across-the-board tax cut for the last two years. It`s my feeling that the reason the American people elected a new President is that they were angry about taxes, they were angry about too much government. And so I have no apology, because I`ve been trying to get this administration to go our direction for the last two years.
HUNTER-GAULT: So it has nothing to do with the taxpayer revolt.
ROTH: Well, I think the taxpayer revolt has been going on for two years. But let me tell you why I favor this. What`s got me concerned is that certainly the economy`s in a mess; I know no one that will disagree with that. We find that middle class, it`s true, are paying higher and higher taxes, finding that they`re on a downward mobility; we aren`t creating the jobs in the private sector. What we`re trying to do with a third tax cut is to move the country in a new direction. We`re interested in having some buoyancy in the economy. And what we hope to do by this tax cut is to promote savings, to promote investment, to promote modernization of our facilities, create jobs in the private sector so that everybody will benefit.
HUNTER-GAULT: Some of your critics have said that this move, which is quite untraditionally Republican, is going to result in a huge deficit and the things that you talk about aren`t really going to happen.
ROTH: Well, you know, it`s very interesting; that`s the big spenders. The administration is circling the wagons in a political attack on what we`re trying to do to help this country and to help the people. Basically let me make this observation: that what we will do is to create new opportunity. What we`re interested in is restoring the American dream. Now, we`ve given the government the chance to show what it can do, and it has resulted in inflation and unemployment. Let`s give the people a chance to show what they can do. And that`s what we`re trying to do by the RothKemp tax proposal.
HUNTER-GAULT: What would you do in terms of the deficit?
ROTH: Well, as far as the deficit is concerned, let me point this out: number one, we`re going to take over $20 billion more in added taxes because of the Carter Social Security increases and because of inflation. So that the net tax cut will be five billion dollars or less. That is not going to create inflation. Secondly, the problem has been that the big spenders don`t look at the feedback. As I mentioned, what we`re trying to do is to promote the growth of the economy. It`s estimated that the feedback to the government will be anywhere from twenty to forty percent, if not higher, by creating new jobs so that people will be going off welfare, and by a larger gross national product.
HUNTER-GAULT: All right, thank you. We`ll pursue some of those points in a moment. At the other end of the tax picture is Congressman Charles Vanik, Democrat of Ohio and a member of the House Ways and Means Committee. He`s also an opponent of any new tax cut this year. Can you tell us why, Congressman?
Rep. CHARLES VANIK: Well, tax cutting is very, very popular, but I think what you have to remember is that the tax cut that is proposed by Senator Roth and the tax cut that is recommended by the Ways and Means Committee is a tax cut that will be paid for with borrowed money. In the case of the Ways and Means proposal it`s going to be $16 billion worth of borrowing additional to present borrowing; in the case of the RothKemp proposal it`s going to be about $28 billion of additional borrowing. Now, I contend that eighty percent of the American taxpayers and eighty percent or more of the American people will lose more than they gain by this tax cut, because when you go into the money markets and you borrow $16 or $28 billion, in the case of the $16 billion it`s going to increase the cost of living by one percent; in the case of the Roth-Kemp plan it`s going to increase the cost of living by one and a half. Now, that means that for all of the people, the eighty percent of the taxpayers who are under $25,000 in income for a family of four, they`re going to pay $450 in increased inflation for a tax cut to them which is going to be less than $300. They`re going to be net losers because the inflation tax is going to more than wash out the advantages of the tax cut. It`s illusory.
HUNTER-GAULT: What would you propose instead?
VANIK: I would propose instead that we simply renew the tax cuts that are expiring this year so that there would be no increase. And then that would reduce the federal deficit by over $30 billion, or the $28 billion, in the case of the Kemp-Roth proposal. I think that with that reduced pressure on the deficit, on the borrowing of this country, it will be the one positive thing that our government can do this year to show that we mean business about inflation.
HUNTER-GAULT: Well, if you take into account inflation and the planned Social Security tax increase, wouldn`t no tax cut mean a substantial net increase in taxes taken out of the worker`s pay?
VANIK: Yes. It would mean that Social Security taxes would increase next year, but I think next year is the time to deal with that, to provide for some special relief for the increase in Social Security taxes. But the Roth-Kemp plan takes one third -- thirty percent of the government`s revenues, and they`re gone. And that simply means that there`s going to be less money to run the county, and I have an analysis that shows that most of that would impact on the so-called discretionary expenditures of the government...
HUNTER-GAULT: And that means?
VANIK: National defense, it means health, it means education. I think that if it would impact on that discretionary area, I think it would have double the impact in the cutbacks that would have to be made in the national security and in the essential health-education programs.
HUNTER-GAULT: How would you propose giving the taxpayers relief without taking away from programs that you feel are needed to sustain the country, like welfare and like defense?
VANIK: I feel that the way to provide for tax cuts is to make them out of reduced government expenditures; I agree with the Senator that there`s waste, there`s extravagance in government, and I think we ought to -- we ought to cut these wasteful expenditures and then use those savings to pay for a tax cut. I think to pay for it out of deficit works the opposite way.
HUNTER-GAULT: All right. Let`s get Senator Roth to talk about some of these problems. The Congressman says your plan is illusory and that everything is going to be lost, in your plan, to inflation.
ROTH: Well, that`s completely and totally wrong, for the reasons I`ve already pointed out. Number one, we`re merely restoring to the people the additional taxes that are going to be taken out; it`s not inflationary. Secondly, as I said, we want to give the people a chance; we think that by enabling people to keep more of their earnings, they`ll save more, it`ll mean capital formation, it`ll mean modernization of our private section, it will create jobs, and it will mean more for everybody -- middle class, poor, disadvantaged. And that`s to our advantage. One of the real problems we have in this country is that our productivity is not moving up, and this will help in that area.
HUNTER-GAULT: How do you feel about his proposal, to maintain the status quo on taxes?
ROTH: Of course all he is saying is that everybody`s going to pay some very substantial increase in Social Security taxes; the person who earns around $8,000 will be paying another seventy or eighty dollars, it will go up to roughly three or four hundred dollars for those making $20,000 or more. And the thing that concerns me the most is that none of these people who -- the minute you talk about trying to help the people, the working people, they immediately yell inflation. I didn`t hear any of these people talk about this $100 billion new authorization in the budget this year, that that was inflationary.
HUNTER-GAULT: Congressman, let me ask you this question: in the end aren`t both of your proposals going to mean higher taxes to the voters?
VANIK: Well, I -- I would say that in the end they will, but I think that the taxes that Senator Roth is going to increase are the inflation taxes. And you want to remember this: that if we go out into the money markets and have to go out there and eventually have to borrow as much as $114 billion by 1980 and up to $165 billion by 1983, that this is going to increase interest rates, it`s going to put pressure on inflation.
HUNTER-GAULT: Is that how much you have to borrow?
ROTH: No, that`s actually wrong. By 1983, if we do nothing, we will be taking an additional billion dollars out of the economy through higher taxes. What we`re trying to do is to put that back into the private sector. Secondly, what the old-time Keynesians, the big spenders, overlook is that by a tax cut you promote savings. And by promoting savings you`re helping to keep down inflation because it doesn`t become necessary for the government to borrow so much or to monetize the deficit. It`s time we have a new approach, a new look at what we`re doing. And what we`re saying is that by giving the people a chance to keep more of what they earn, by enabling them to save more money, that we will increase the gross national product, the pie; and there`ll be more money for everyone in the long range.
HUNTER-GAULT: All right, we`ll pursue some of those points later; thank you. Robin?
MacNEIL: Yes; let`s come back to Burns Roper and voters` attitudes on a one third cut in taxes such as we`ve just heard described by Senator Roth. As we saw, forty-eight percent thought that would be a pretty good thing, a plurality of two to one. Roper also asked his national sample what would happen if all taxes were cut by one third. There was a wide range of reactions, and here are two of the most dramatic. Referring to Congressman Vanik`s point, only nine percent of the people thought that national defense would be jeopardized, but forty-six percent thought that needless, wasteful government programs would be eliminated. Mr. Roper, in general, as I understand it, a plurality -- nearly half the voters -thought that more good things would flow from an across-the-board tax cut of one third than bad things, is that correct?
ROPER: Yes. The first six things that people thought would happen, the highest six things, were all positive effects -- good effects. The bad things ...
MacNEIL: What were some of the other good ones besides the forty-six percent saying that wasteful programs would be eliminated?
ROPER: They thought there would be less money for unemployment insurance benefits and welfare payments, and hence more people would go to work. They thought government would become more efficient, they thought government would become more responsive, they thought that inflation would be reduced -- contrary to inflation being increased because of borrowing, they thought it would be reduced because there would be less government spending. They thought the middle class would get much-needed relief, and that`s where they think the relief is needed.
They thought, on the bad side, unemployment would rise because of government worker layoffs. But the first bad thing came in in the number seven position.
MacNEIL: Can you find in your data any spirit of self-sacrifice -I would be willing to give up this which benefits me for lower taxes -or is it all, I`d be willing to see given up things that benefit other people?
ROPER: No, in the H&R Block study, the one we did before the Jarvis Amendment, we asked people about possible additional deductions for various kinds of people, and we pointed out that anytime someone gets an additional deduction that means everyone else pays a somewhat higher tax to pay for it. We got eighty-four percent favoring an extra exemption for people who are physically disabled, like the blind exemption or the over 65 exemption. And there are very few people that are personally physically disabled, so they weren`t voting their self-interest.
MacNEIL: Let`s go back to the gentlemen who are concerned with responding to these pressures from the people with actually writing tax bills. Congressman Vanik, do you feel, hearing these results, that the public simply does not understand the economic consequences of what they desire to happen?
VANIK: I don`t think they understand that of the almost $500 billion in the federal budget over half of it is committed -- seventy-five percent; almost seventy-five percent of it is committed to things that Congress can`t do anything about: the Social Security program, Medicare, all of those programs -- the veterans` benefits. We have a discretion on twenty-five percent of the budget, and all of this tax cut would impact on that twenty- five percent. It simply means there`s not going to be enough money for an adequate defense of this country. If the people of American want the Roth- Kemp plan, they`d better buy the Roth-Kemp home defense system, because I don`t think our country is going to be able to defend them in the degree and to the extent that it should.
MacNEIL: Senator Roth, do you think, as I would guess you might, that the public has some deep inner wisdom about this? How do you look on these findings that they don`t think defense would be cut very much?
ROTH: Let me point out that if we do nothing about taxes, currently we`re taking in revenues something like $460-plus billion a year. By 1983 that will amount to $300 billion more, roughly $760 billion. Now, our tax cut would amount to $100 billion, so that`s $200 additional billion that we will have for the federal budget. That doesn`t satisfy the big spenders, they still want more. What I`m saying is that we can have the Roth tax cut, which gives some upward mobility to the American people, we will still have $200 billion additional for the federal budget during the next five years. That means that you can increase the federal spending five or six, seven percent a year and balance the budget and have a tax cut. But more important, we`ll get the economy moving upward. There`ll be a larger pie for everyone. And that`s what we`ve got to do; we`ve got to restore the great American dream, to give some buoyancy to the economy, and the only way you`re going to do that is as President Kennedy said in the `60s, give the people, the private sector, a chance to show what it can do.
MacNEIL: Coming back to the attitudes of the people as you discovered them, Mr. Roper, how accurately and how realistically can people consider the practical consequences in this kind of opinion surveying? I mean, not everybody`s got an economics degree, and not everybody`s on the tax committee in Congress.
ROPER: That`s true, and there is a lot of misinformation and there is a lot of difference of opinion, as these two members of the Finance Committee and the Ways and Means Committee disagree. We pointed out in our studies the tradeoff, the fact that if this happened that was likely to happen, if there was a cut there could be a cut in services, if an exemption was given it would mean an increase in tax rates. We didn`t just say, Would you like something for nothing. I think people pretty well understood. And if I could go back to what Senator Roth was saying, for just a minute, the public supports his position; they think that a cut in the tax rate would not mean a cut in government revenues.
MacNEIL: Gentlemen, in conclusion, if I may label you arbitrarily, both of you represent a position which is at some end of an extreme, or the spectrum in this; is it not likely that what`s going to emerge from the Congress will be something nearer the compromise that`s being talked about between the Ways and Means Committee`s 16 billion and the Carter administration`s compromise of $18 billion? Isn`t it likely something in the middle will come out of all this in a few months` time? What do you think, Congressman Vanik?
VANIK: Oh, I think the prospects are very great that the Ways and Means proposal will probably be adopted by the House. I don`t think it`s the wise course to go, but I think that`s what the committee will do.
But it simply means that next year and the year after that there simply won`t be that $16 or $18 billion to take care of the Social Security adjustments that have to be made next year and the many other problems that lie ahead. I think that it would be on the side of Providence. I think we in public life have an obligation, we have a public trust, and I think it`s our responsibility not to cater to the -- and particularly respond to -- the fantasies of our people. I think we want to give them the hard facts, and I think we ought to put it right on the record. And I think putting it on the record tells them in no uncertain terms that a tax cut may not be as rosy as you think; the dollars you get afterward may buy you an awful lot less than the dollars you have now.
MacNEIL: Senator, we`ve just a few seconds; do you think some compromise such as we`ve just described is probably going to emerge?
ROTH: Well, frankly, I hope not, because I think it`s about time we take a long-range look at what we`re doing, and not the short-range.
MacNEIL: We have to end it there, I`m afraid; in the short range right now we have to end it. Thank you both, gentlemen, for being with us this evening. Good night, Charlayne.
HUNTER-GAULT: Good night, Robin.
MacNEIL: Thanks, Mr. Roper. That`s all tonight. We`ll be back tomorrow night. I`m Robert MacNeil. Good night.
