Tax-cut cap defeated, but Democrats hope 'fairness' theme will be winner
Washington — The 25 percent income tax cut, the crown jewel in the Reagan economic program passed in 1981, has survived without a scratch. Just two days before the final 10 percent reduction was to go into effect, the Senate easily turned back a proposal to cap the cut at $720 per taxpayer.
As a result, Americans will begin to see the full effect of the Reagan tax cuts on July 1. And they will probably see the political fallout from now until the elections next year.
''It's 100 percent politics,'' said Sen. Robert Dole (R) of Kansas on Wednesday, shortly before the Senate rejected by a 55-to-45 vote a Democratic plan to limit the relief for wealthier taxpayers.
The tax-cut cap is the newest Democratic push on the ''fairness'' theme, which helped them win 26 seats in the last congressional election. Democrats are taking aim at what they see as President Reagan's weak spot - a public view of him as the friend of the rich.
As proposed, the cap would have given most taxpayers the break they had been promised, but those at the top would have been limited to $720. According to Democrats, only about 1 in 10 taxpayers would be affected, and most persons earning under $50,000 would receive the full tax reduction.
''In West Virginia, only 2.9 percent of the residents make more than $50,000, '' Senate minority leader Robert C. Byrd said of his home state during the floor debate.
Republicans counter that the Democratic cap would have hit many middle-income households with two wage earners, as well as farmers and small-business owners. They also charge it would have hurt the economy. ''This is the wrong time'' to change the tax cut, said Sen. Pete V. Domenici (R) of New Mexico, ''because, as the President says, America is on the mend.''
Responding to Democratic charges, President Reagan defended his tax cut Tuesday during the opening statement of his press conference. ''Fairness is not appealing to envy, pitting group against group,'' he said. ''And fairness is not penalizing the initiative, hard work, savings, risk-taking, and investment that we need to create more jobs.''
Rep. Tony Coelho of California, chairman of the Democratic Congressional Campaign Committee, called the Reagan's ''fairness'' statement a clear sign that the White House is sensitive to the charge.
Representative Coelho said he plans to crank the tax-cap vote into a Democratic campaign strategy similar to that of 1982. ''Basically it reinforces the fairness theme and the feeling widely held by people that Reagan and the Republicans are protecting the rich.''
Moreover, he said, the vote hands Democrats another issue, since it shows the GOP to be indifferent to federal deficits. The cap would have brought in an estimated $6 billion in revenues in 1984.
Democratic campaign wheels are already turning on the issue. The Coelho committee has sent out news releases to targeted districts, including that of House Republican leader Robert H. Michel, whose blue-collar Illinois constituents almost turned him out of office in 1982.
The saying among Democrats is that the vote against the tax cap ''is not going to play well in Peoria,'' the biggest city in Representative Michel's district.
A Michel spokesman argues, ''We don't see it as an issue that is going to get the Democrats an awful lot of mileage.''
''We think we made our case fairly well,'' says the aide, pointing out that in the House, which passed the tax cap on June 23, not one Republican deserted the President.
But the Michel aide foresees problems if the Democrats step up their fairness campaign for the '84 elections. If the tax cap ''is thrown into a pot with a whole bunch of other fairness issues, it could cause us some problems,'' he says.
Republican members of the Senate, like their House colleagues, stood firmly behind the President with only three deserters. Even the so-called ''gang of five'' moderate GOP members who had earlier called for eliminating altogether the third year of the President's tax cut voted against the tax-cut cap.