Plans for taxation drawn along party lines

WASHINGTON"" The 2008 presidential race is likely to produce a sharp debate over tax policy and its effects on individuals, estates, investments and corporations. But voters may have to wait for the general election to hear it.

That is because there is substantial agreement on the biggest policy questions within each party's field of primary candidates. For now, those broad areas of consensus have left intraparty rivals to bicker at the margins.

Top Republican contenders Mitt Romney and Rudy Giuliani are prime examples. While Giuliani boasts of cutting taxes 23 times as New York City mayor, Romney notes that "there are some taxes he actually fought to maintain," including a levy on suburbanites commuting into the city. The former governor of Massachusetts also suggests that the national front-runner has been slow to spell out his tax ideas and sign a conservative "no new taxes" pledge.

Giuliani levels similar charges against Romney. Though Romney advocated state-income-tax cuts and succeeded in cutting capital-gains taxes, "there were no broad-based tax reductions during his four years," said Paul Cellucci, a Massachusetts Republican who preceded Romney as governor and is now a top Giuliani ally. "The question is whether he has the instincts and the ability to convince the Congress" to get such reductions enacted.

Such talk obscures what the two candidates agree on: making President Bush's tax cuts permanent, reducing corporate tax rates, opposing tax increases on private-equity-firm executives and eliminating the estate tax. Both men, said veteran antitax activist Grover Norquist, are "heading in the right direction."

The same dynamic exists among top Democrats in the race. Sens. Hillary Clinton of New York and Barack Obama of Illinois and former North Carolina Sen. John Edwards all propose to revert to the 39.6 percent top individual tax rate that President Clinton bequeathed Bush before the latter's 2001 tax cuts. All would raise taxes on private-equity-firm managers and preserve the 45 percent estate-tax rate on some multimillion-dollar estates.

"There are two things the tax code is supposed to do: raise enough revenue to support the government and smooth the rough edges of capitalism," said Bob McIntyre of Citizens for Tax Justice, a leading voice in Democratic tax circles. "All of them are inclined to do that to varying degrees."

Among the varying degrees: Clinton and Obama would reverse Bush's tax cuts for those with incomes above $250,000, while Edwards would reverse them for incomes exceeding $200,000. McIntyre dismissed that difference as minor.

More consequential may be Clinton's statement that she would let the Bush tax cuts for high-income families expire in 2010 rather than seeking an immediate increase upon taking office &

as Edwards and Obama have pledged to do.

"That's a significant difference" in forgone government revenue, McIntyre said. The Edwards campaign estimates that waiting could deprive a new administration of $156 billion of revenue.

And while her chief rivals have pledged to boost Bush's 15% tax rate on capital gains &

Obama to 20 percent, Edwards to 28 percent for households earning $250,000 or more &

Clinton has declined to state a position. In some ways, that isn't surprising for a senator who represents the nation's financial capital. But Clinton has also sought to project an image of balance and centrism on economic policy, in tune with her husband's administration, while receiving Wall Street backing for her presidential bid.

Sen. Chris Dodd of Connecticut, chairman of the Senate Banking Committee, has been similarly wary of increasing taxes on investors. While consistently opposing Bush's tax cuts, the long-shot Democrat has declined to embrace proposals for higher taxes on hedge-fund or private-equity executives.

The biggest remaining wild card in the race is Republican Fred Thompson, the former Tennessee senator who is expected to enter the race in the coming months. "There have been some worrisome signs that he will be weak on taxes, which is rather bizarre for a candidate who wants to become the next Reagan," said Dan Mitchell, a tax expert at the libertarian Cato Institute think tank in Washington.

Norquist pointed to Thompson's refusal so far to rule out higher taxes as part of a solution to the potential insolvency of the Social Security and Medicare programs.

Thompson has edged away from suggestions that he favors a radical overhaul known as the "FairTax," which would junk the income tax altogether in favor of a national sales tax.

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