Truth On Taxes, Please

By , Jim Moody (D) is a congressman from Wisconsin and serves on the House Ways and Means Committee.

THE just completed mega-budget reconciliation bill for 1990 caused months of gridlock and agony in Washington. But it achieved one important result: It unzipped the lips of George (``No new taxes'') Bush. This bill, which Mr. Bush negotiated and signed, included $5.6 billion in - hold your breath - NEW TAXES. By mutual agreement they were called ``revenue enhancers,'' but they quack just like taxes. They are taxes.

These new taxes will shrink the mammoth deficit somewhat; but if we could openly admit that these revenues are taxes, they may clear the way for the White House, Congress, and the country to move toward more honest budgeting next year.

Most observers agree that we need to cut spending and raise taxes to balance future federal budgets - thereby reducing our dependence on foreign lending, and shrinking our trade deficit. We can't do it by cuts alone because two-thirds of the budget goes for ``entitlements'' like Social Security and the interest on previous debts. The remaining third (except military spending) has already been deeply cut. And given changes in Europe, and the long lead time for curtailing weapons systems, the ``peace dividend'' alone can't produce the scores of billions needed.

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Here are some of the 41 revenue increases Bush just signed: Elimination of tax preferences for Employee Stock Option Plans and zero coupon junk bonds, raising over $1 billion. ESOP's and ``zeros'' had become favorite leverage tools of corporate raiders so these tax changes had a certain policy purpose. But the main motive was to raise revenues plain and simple. The bill also changed the method for calculating the maximum income subject to Social Security tax, raising $400 million and costing 8.5 million taxpayers each about $68 per year.

The federal excise tax on international airline tickets was doubled, raising another $44 million, and the current 8 percent tax on all airline tickets, scheduled to expire this December, was reinstated to raise an additional $850 million. A tax on ozone-depleting chemicals was instituted, and oil will be taxed an additional 5 cents per barrel, together raising $600 million new dollars.

The reconciliation bill also employed several creative accounting gimmicks - taxes by another name. The largest one, accelerating collection of all Social Security taxes, will raise $2.4 billion. Again, grabbing additional revenues, not policy, was the motivation.

The discouraging part of this year's budget charade was President Bush's perceived need to copy Mr. Reagan's eight-year pretense of opposing any and all tax hikes. ``Make my day'' rhetoric notwithstanding, during his tenure President Reagan quietly signed seven tax bills raising a total of $400 billion. (Of course those tax bills were necessary because of his huge tax cut in 1981 which lost $750 billion in tax revenues over the same eight years.) Thank goodness he did support those taxes or by now we would be in complete hock to the Japanese and other foreign lenders.

The time has come to ask if America really benefits from the disingenuous ``no tax'' posturing by the White House practiced so extensively under both Presidents Reagan and Bush. So far the real result seems to be camouflaged tax hikes and budget fakery on a grand scale designed to fool the general public - with help from the press and politicians when they uncritically parrot Presidential statements about taxes. But what about America's bedrock belief that a true democracy requires a truly informed public? What would Thomas Jefferson think of this subterfuge? When a self-respecting democracy needs to raise taxes to meet its obligations and excise the deficit cancer, why not say so openly?

The ``make my day'' tax policies of the 1981-88 period had the effect of running up historically staggering federal debts that cause current interest rates in America to be about 2 percentage points higher than those in Europe or Japan. This (1) stifles private investment, thus reducing future growth of the nation's economy, and (2) drives up the value of the US dollar versus the yen and the deutsche mark and other currencies. This makes our goods less competitive.

The Reagan tax and budget policies continue to have repercussions far beyond their impact on deficits, interest rates, and currency values. They slighted the investment accounts of the public budget: education, job training, technology, research, the environment, infrastructure, child nutrition, health care, drug enforcement, and our ability to compete overseas. These parts of the budget will influence the quality of life and productivity of our society in the years ahead - another reason why the federal deficit must be dealt with now.

No matter how urgent, under our political system of separation of powers Congress will never craft realistic, investment-based budget or tax agendas without responsible leadership by the White House. What's needed in Bush's second year is a candid public dialogue on national priorities, on spending cuts, and on taxes - free from campaign slogans and subterfuge. Only then can our great national democracy forge understandable policies that address our accumulated social, educational, environmental, and infrastructure ``deficits,'' as well as restore our competitiveness.

Now that President Bush has unzipped his lips and embraced taxes, the process of crafting solutions can begin. The time to start is now.

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