WASHINGTON — When it comes to the Bush administration's tax cuts, Washington state's Democratic Sen. Patty Murray and her Republican opponent, Dino Rossi, couldn't have more divergent views.
Though the Senate won't vote on whether or not to extend the tax cuts until after the Nov. 2 election, the differences strike to the core of the campaign's economic debate. Whatever the outcome, it will be felt by the nearly 3.2 million Washington state residents who file federal returns.
The tax cuts, which took effect in 2001 and 2003, expire at the end of the year. No one thinks they won't be extended in one form or another, but with the game of chicken unfolding on Capitol Hill there are no certainties.
Along with spending, the tax cuts are an integral ingredient in any effort to cut the federal deficit. According to some budget estimates, letting all of them expire and allowing tax rates to rise to pre-Bush levels could nearly balance the federal budget by 2015.
Murray wants to renew the tax cuts, but only for the middle class, defined as single taxpayers making no more than $200,000 and couples with a combined income of no more than $250,000. Using figures supplied by the Washington state Department of Revenue, Murray's staff estimated that under the Democratic plan 98 percent of the state's taxpayers would continue paying the lower rates.
Rossi and Republicans are being disingenuous when they talk about reducing the federal deficit while pushing to renew the tax cuts for everyone regardless of income at a cost of about $4 trillion, Murray said.
"Republicans can't have it both ways," Murray said in an interview. "This is a time that requires thoughtful action, not 30-second sound bites."
Along with other Republicans, Rossi wants to extend the tax cuts for everyone regardless of income. He said Murray and the Democrats are proposing a job-killing approach at a time of economic uncertainty. If Murray has her way, Rossi said, small businesses, which create two-thirds of the nation jobs, would suffer.
"She has never held a private sector job," Rossi said in an interview. "Murray thinks only the federal government creates jobs. She doesn't understand. She needs to reauthorize all these tax cuts and quit playing class warfare."
There are plenty of arguments on both sides and few hard facts. Conservatives say the problem isn't tax cuts, but the $46 trillion in federal spending. Liberals say extending the tax cuts to all would require the greatest reduction in federal spending since the end of World War II to get the federal budget under control.
In a report, the non-partisan Congressional Budget Office said the overall economy would be better off if the tax cuts were extended, but only until 2012, when the extra borrowing they require would start to be a drag.
The tax cuts sought by President George W. Bush and approved by Congress, then controlled by Republicans, reduced rates across the board, including a reduction in the top rate from 39.6 percent to 35 percent. They also created a new 10 percent rate at the low end, wiped out the so-called penalty on married couples, doubled the child tax credit and lowered taxes on capital gains, dividends and inheritances.
Senate Republicans want to extend all those cuts, adding about $4 trillion to the federal deficit over the next 10 years. The Senate Democratic plan, though not finalized yet, would add about $2 trillion to the debt by extending most of the tax cuts, but not for about 3 million of the nation's wealthiest taxpayer.
Rossi said the Democratic plan would fall hardest on small business owners, who are already struggling because of the uncertainty over their future tax burden.
"We need to extend all of them," he said.
Rossi, citing Treasury Department figures, said the 2001 and 2003 tax cuts overall had saved money for 2.2 million Washington residents. That included more than 800,000 who received tax relief because of the end of the marriage penalty, more than 600,000 who took advantage of the increased child tax credit and nearly 590,000 businesses that reported they benefited.
"Murray is always on the far left fringe of everything," Rossi said. "It's not just tax cuts, it's all about Murray taking votes to kill more jobs. She either doesn't listen to the experts or she will do what she will do."
Murray declined to get into a sound bite duel with Rossi, but she said the issue is whose taxes should be cut. She said it was her preference to cut those of the middle class rather than 67,500 of the wealthiest taxpayers in Washington state.
"My focus has always been the middle class," Murray said.
Murray said current Republican arguments sound like the "trickle down" theory that was popular during the Reagan administration, when tax cuts for the rich were expected to spur investment and improve the economy from top to bottom.
But even though taxes for the wealthy have been cut over the past 10 years, the country is still in an economic mess.
"It didn't work," she said.
Murray said that in 1993, during her first term, the nation faced record deficits and, among other things, Congress imposed a pay-as-you-go rule that required that any additional federal spending had to be offset by spending cuts elsewhere or new revenue. By the time the Bush administration rolled into office, the country was running a budget surplus.
Since taking the Senate back, Murray said, Democrats have reinstituted the pay-as-you-go rule.
"I made tough votes in the 1990s," Murray said of getting the nation's finances under control. "We have to look at everything now. I have a grandson and I do not want to pass on a debt and crumbling infrastructure and classrooms."
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