Tax Argument Turns Up Heat in Democratic Debate

CHICAGO —  In a heated debate of their views of the country’s future, the three Democratic presidential candidates Friday night disagreed most sharply and signficantly over tax policy.

Arkansas Gov. Bill Clinton, former Massachusetts Sen. Paul E. Tsongas and former California Gov. Edmund G. (Jerry) Brown Jr. squared off as they bid for votes in next Tuesday’s primaries in Illinois and Michigan.

Clinton, re-established as the race’s front-runner following last week’s Super Tuesday primary triumphs in the South, lashed out at Tsongas after his rival derided as “candy” Clinton’s proposed tax cut for the middle class.

“Those who don’t want a middle-class tax cut,” Clinton told Tsongas, “don’t understand how unfair this country has become.”

Referring to a series of hikes in the Social Security payroll tax, Clinton also said: “Working class people, those who don’t live as well as you and I do, had seven tax increases in the 1980s.”

He said Tsongas’ economic plan--which stresses pro-business policies--would “pound the middle-class people into the dirt.”

Tsongas, battling to rebound from his Super Tuesday setbacks in Dixie, promoted his own plan for a capital gains tax cut, arguing that it would revive manufacturing.

Stressing that “hard choices,” rather than politically popular ones, are needed to revive the economy, he said the government must “take all our resources and pour them into the engine that drives the economy, which is manufacturing. People need jobs.”

Along with the capital gains tax cut, a key component of Tsongas’ economic recovery plan is a 50-cent-a-gallon gas tax increase phased in over 10 years.

Clinton attacked that proposal as inequitable, but Tsongas maintained that it would help conserve energy and provide funds for improving the nation’s battered infrastructure.

Brown, whose long-shot bid for his party’s nomination has been gaining credibility, scoffed at both the Clinton and Tsongas plans as inadequate for dealing with the inequities of a tax code he described as “a banquet feast of corruption.”

Instead, at every opportunity, he pushed his plan to replace the tiered income tax rate structure with a single 13% rate for all taxpayers. He also has proposed what would amount to a 13% national sales tax.

“Revamp the entire federal tax code and replace it with a 13% tax on individuals,” Brown argued. “Let rent be deducted; home mortgage and charity. Thirteen percent on business and deduct only purchases. This will stimulate. . . . This is what’s going to make America go.”

Clinton charged that Brown’s proposal would be a windfall for the rich and would “increase the tax burden on middle- and lower-income Americans.”

Brown also repeatedly bid for labor support during the debate, criticizing his Democratic rivals and President Bush for supporting a free trade agreement with Mexico that Brown said would cost American jobs and exploit Mexico’s workers and environment.

Tsongas attacked Clinton’s record on taxes in Arkansas, saying gas and sales taxes raised during Clinton’s tenure were regressive. Clinton answered that his state still ranked 49th in terms of state and local tax burden and that the money raised had been invested in roads and education.

The Illinois and Michigan primaries are important not just in terms of the nominating contest, but also for the general election in November. Without the electoral votes of these and other large industrial states, the Democrats will have a hard time breaking their string of three successive presidential defeats.

It was just this point that Tsongas has been emphasizing during his campaign stops in both states, contending that he would prove more electable than Clinton in November. He claims that his ability to attract Republican votes with his pro-business economic message, as well as the various personal controversies that have surrounded Clinton, gives him this advantage.

But a new USA Today-CNN-Gallup poll, conducted in the wake of Clinton’s strong performance in Super Tuesday’s 11 primaries and caucuses, seemed to contradict Tsongas’ point. It showed Clinton running the closest race against Bush, trailing the President by only six percentage points. Tsongas, by contrast, trailed by 17 points. Brown ran 25 points behind the President.

Times staff writers Edwin Chen and Jonathan Peterson contributed to this story.