Dean Pushes Middle-Class Tax Relief

WASHINGTON – Under attack from his Democratic rivals, Howard Dean (search) is suddenly giving middle-class tax relief new prominence in a campaign that has long emphasized balancing the budget and repealing President Bush's tax cuts.

"I think cutting payroll taxes is not a bad idea. It's certainly something we're going to look at," the former Vermont governor said in Sunday night's candidate debate. Aides added that higher taxes on corporations would completely offset the cost to the Treasury.

The former Vermont governor was vague about details and sidestepped a question of when such a cut might take effect. Campaign officials said no formal proposal was likely for a few weeks, at least until after the nation's first primary, Jan. 27 in New Hampshire.

Still, if not a change of course, talk of easing the tax burden on the middle class marks a new emphasis for Dean, who often boasts that he is the only candidate in the race who has balanced a budget.

Aides point out that he has long pledged to make the tax system fairer and simpler for the middle class. But until Sunday night, Dean omitted mention of new relief when critics said repeal of Bush's tax cuts would mean an increased burden for many wage earners.

In last week's radio debate in Iowa, a listener submitted a question to Dean by e-mail, asking, "How can you justify taking this money from us?"

"Ultimately, we will have a program of tax fairness for the middle class," the former governor replied.

As he has many times, he said that overall, Bush's tax cuts contained no breaks for the middle class. All Americans who pay taxes have received some relief from the legislation, although Dean backs up his claim by saying that any reductions are more than offset by increases in local taxes, health care costs and higher tuition fees.

"The fact is, we've got to balance the budget," as well as provide health insurance and more money for education, he said in his response to the question.

"I think we cannot keep telling people we're going to give them all the programs they want and then there's not going to be any sacrifice of any kind."

Within minutes, Sen. Joe Lieberman (search) of Connecticut and John Kerry (search) of Massachusetts jumped in, arguing that Dean's plan would raise taxes on the middle class.

"I don't know what he means when he says ultimately we're going to have a tax reform program," Lieberman said. "We're running for president now. We have to tell people what we want to do."

Kerry brought up the case of a Des Moines, Iowa, woman, a reservist and nurse whom he said earns $55,000 a year with her husband. "She has five kids. She already has health care. She's not going to be helped. She's going to pay an additional $2,200 of taxes" under Dean's plan, he said.

It was not the first time Dean had been hit on the issue, but it coincided with a change, since he soon began to talk more readily about tax relief.

While one aide stressed during the day that no final decisions have been made, Dean said flatly on ABC's "This Week" on Sunday that he would propose a payroll tax cut.

Later, questioned on his plans by Rep. Dick Gephardt of Missouri, he said he had in mind an income tax credit to offset payroll taxes. "If we end up cutting payroll taxes, which is the most regressive tax there is for low- and moderate-income workers, it will come out of the general fund in the form of a tax credit. We will not touch Social Security," he said.

Neither Dean nor his aides have been forthcoming with details on when a tax cut would take effect.

Dean has said previously that he doesn't expect to balance the budget during a first term in office, but in the sixth or seventh year of his administration.

Asked during Sunday night's debate whether he would wait to balance the budget before going ahead with a middle-class tax cut, Dean replied, "That's right." He then added, "what we will do is lay out a plan to balance the budget and include some sort of plan to increase corporate taxes/"

One aide said, though, that Dean's view is that a balanced budget plan must be in place for tax relief to go forward, and it is not necessary to first erase the deficit.

Officials also stressed that the tax cut would not contribute to the deficit, but be offset by increased taxes on corporations.

Dean said on ABC, "The reason we don't have an exact figure for how much our payroll tax cut's going to be is because we've got to balance the budget first."