THE ISSUE IS TAXES

As the budget battle rages in Washington and tax revenue from working Missourians gushes into Jefferson City at an unprecedented rate, it is time to focus on the issue many in government would rather not discuss. That issue is tax cuts.

Federal tax cuts:

In November 1994 congressional elections, voters swept Republicans into majority status, in both the House and Senate, in a historic landslide that represented a sharp break with business as usual along the Potomac. At the center of the historic document known as the Republican Contract With America was a pledge to enact tax cuts.

Specifically, the newly installed congressional majority had pledged to pass $500 tax credits for each dependent child in a family. Also in the GOP plan was a stated commitment to slash the rate of taxation on capital gains, or those investments the sale of which yield taxable gains -- most commonly real estate, stocks or bonds. On both commitments, the GOP majority has kept its word. The promised tax cuts passed both House and Senate, survived conference committees to iron out differences and landed on President Clinton's desk, whereupon they were the object of a presidential veto.

The president has wrapped his opposition to the GOP tax cuts in a fog of hoary rhetoric and drearily familiar demagoguery about "tax cuts for the rich." He claims to favor "carefully targeted tax cuts." Translation: He favors having his government decide that some Americans get tax relief while others don't.

It is hardly "tax cuts for the rich" to extend the GOP tax relief to the strapped parents of young children, working and scrimping to put food on the table while paying for braces and college. That $500 per child should be in the pockets of working Americans with young mouths to feed.

As for capital gains, the facts refute standard demagoguery that this is a "rich man's tax cut." Does it even need to be said? The rich are already rich. Their capital gains have already been made and are mostly behind them. It is the poor and middle class who, desperately in need of access to capital, would benefit most from reduction in the cost of capital and the release of locked-up capital that would mean. This is an optional tax, one that is paid only when the holder of a capital asset chooses to incur the tax by electing to sell.

Experience with reductions in the capital gains tax, as in 1978, demonstrate beyond contest that a significant reduction in this rate of taxation actually produces higher revenue, as holders of capital assets bring those assets onto the market and free up the investment capital locked in by the higher rates. Conversely, when the rate was raised in 1986, the higher rates caused revenue to fall. Moreover, as long as this tax rate isn't indexed for inflation, government is taxing away illusory gains that are wholly the result of inflation of the money supply.

State tax cuts:

The huge tax increases Gov. Mel Carnahan pushed through in 1993, his first year in office, have yielded revenue gushers of unprecedented proportion in Jefferson City. Consider the facts from a few key categories of state tax revenue, comparing the results from fiscal 1995 with those of the year before. Sales and use tax: up 6.9 percent. Individual income tax: up 16.4 percent. Inheritance tax: up 31.6 percent. Corporate income tax: up an enormous 45.4 percent.

Mel Carnahan's response to this revenue gusher has been to add one billion dollars to state spending in the last year. Tax cuts haven't been part of his program.

Sen. Bill Kenney of Lee's Summit, a GOP candidate for governor, has proposed a bill that would raise the dependent exemption for Missourians from its current $400 to $1,200. This exemption hasn't changed in 50 years. It is time that some relief were extended here. Sen. Peter Kinder, R-Cape Girardeau, is exploring large cuts in the state inheritance tax, which yielded $73 million last year. While they are at it, they ought to look into repealing or scaling back Mel Carnahan's corporate and personal income tax hikes from Senate Bill 380, his crown jewel.

The economy is slowing noticeably. Like Americans nationwide, Missourians are overdue for some tax relief. They are looking to leaders in government to fight for a lighter tax burden.