Tax Cuts Would Reverse GOP's Dangerous Slide

After the November 1998 elections, horsewhipped Republicans claimed they heard the complaints of conservative voters (or actually conservative nonvoters) loud and clear. Trent Lott promised that the Senate would scuttle the accommodationist tactics and vacuous policy agenda that contributed so mightily to the deflated Republican turnout.

Instead, during the last six months, the political gangrene that first appeared in late 1998 seemingly has spread to the party's every vital organ. By year's end, the GOP's accomplishment list probably will include an increase in the minimum wage, a $30 billion domestic-spending spree above the 1997 balanced-budget-agreement caps, Medicare prescription-drug benefits, and a de facto reversal of the Contract with America provision limiting terms on congressional committee chairmen. That sounds suspiciously like House Minority Leader Richard Gephardt's wish list, not Majority Leader Dick Armey's.

Meanwhile, Republicans can't seem to get rid of anything in Washington, no matter how useless or counter-productive. For example, during the last 18 months the obsolete departments of Energy and Commerce have been sources of major scandals that are profoundly embarrassing to the Democrats. The public now recognizes these agencies for precisely what Clinton-Gore have converted them into: automated teller machines for the Democratic National Committee. If the Energy Department can't be boarded up forever after one month of banner headlines of an open-door policy to Chinese spies, can this relic of the Carter oil-crisis era ever be abolished?

Too many Republicans have become enamored of late with the tax-spend-and-elect model of governance that allowed Democrats to cling to power for four decades. The most powerful member of the House these days is not Speaker Denny Hastert or Majority Whip Tom Delay, but Transportation Committee czar Bud Shuster of Pennsylvania. Shuster is a prodigious spender who last year proposed paving the nation over in zigzagging two-lane highways (jobs, jobs, jobs) and got all but a handful of Republicans to comply dutifully. Just last month he successfully lifted the domestic spending caps by roughly $30 billion for extra airport spending. Either Shuster is in the wrong party or I am. Sorry, but the tent just isn't big enough for the two of us.

The tactic of placating the left wing of the party and accommodating President Clinton is the course most likely to lead to the GOP forfeiting the power in 2000 that members now clutch to so desperately. The appeasement strategy could lead to bigger losses in November 2000 -- no matter how superhuman Texas Gov. George W. Bush might turn out to be as a party savior. The conservative base simply will vanish or search for other outlets, such as voting for quirky Jesse Ventura-type independents that at least stand for something -- such as the policy-schizophrenic but charismatic Pat Buchanan.

The one and perhaps only issue that can resuscitate the GOP now is tax cuts. It is the one issue that still polarizes the two parties. Clinton could not have been more direct when he said that Americans shouldn't get a tax cut for the next 15 years. Larry Kudlow and I recently noted that the combined income- and payroll-tax burden (measured as a share of wages and salaries) has ratcheted up from 22 percent to 26 percent since Clinton first was elected.

Congress needs to rally behind a tax cut that would offer a tangible income boost to workers. In this era of investor-class politics, support for individual-retirement-account expansions, capital-gains relief and death-tax repeal is off the charts. Meanwhile, the capital-gains tax cut from 28 percent to 20 percent has doubled tax receipts from sales of stocks and other assets, just as supply-siders had predicted. Sheer common sense says: Keep mining that ore! Republican Sen. Paul Coverdell of Georgia has a small-savers bill that would do most of these things.

Here's one essential revenue offset to these tax cuts -- a windfall-profits tax on trial lawyers in the tobacco litigation. These lawyers soon will be receiving a $30 billion windfall from the tobacco settlement, with many of these parasitic attorneys receiving fees of well more than $1,000 an hour. In the name of children, Congress should slap a 90 percent windfall-profits tax on such settlements, as suggested by Michael Horowitz of the Hudson Institute, and the revenues should be diverted to tax cuts for families with kids. Let's see Clinton and Gore spinmeisters argue against that.

But don't stop there. It's time to phase in a cut in the regressive payroll tax. It's the one economic policy that unites and excites both economic and religious conservatives.

Most importantly, recapture the vast populist appeal of scrapping this imbecilic tax code. How? By enacting an optional postcard flat tax of 20 percent. Simply leave it up to taxpayers to decide for themselves whether they want their precious mortgage and charitable deductions and their municipal-bond write-offs, or whether they want a low-rate tax return with no deductions that they can fill out in five minutes. This is a magic bullet: tax reform with no losers -- with the exception of accountants, lawyers and psychiatrists. Some 30 years ago the left gave America an alternative minimum tax. Now it's time for conservatives to give Americans what I call an alternative maximum tax.