TAX PLAN WOOS THE MIDDLE CLASS

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, January 17, 1992                   TAG: 9201170528
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-1   EDITION: METRO 
SOURCE: The New York Times
DATELINE: WASHINGTON                                LENGTH: Medium
TAX PLAN WOOS THE MIDDLE CLASS
The income-tax cut President Bush plans to propose this month would make families with incomes of more than about $50,000 the biggest winners, drawing a new line in his election year battle with the Democrats over who can develop the more attractive tax breaks for the middle class.
On the heels of Bush's campaign trip to New Hampshire on Wednesday, the first of the election year, new details began to emerge about the budget package he will send to Congress Jan. 29.
For example, he plans to propose increasing the personal exemption for a family of four by a total of about $2,000, which would amount to a tax cut of up to $620.
The Democrats, in Congress and on the presidential campaign trail, have not found a tax policy they all can support, but most of their proposals aim lower on the income ladder than the president's.
Sen. George Mitchell of Maine, the Democratic leader, assailed the president's policies in a speech Thursday. But pressed by reporters afterward, he declined to say what specific tax policy he would support.
Bush is expected to argue that a tax cut, which would be immediately reflected in withholding tables, would generate additional spending and stimulate the flagging economy. Democratic politicians tend to accept that view.
But most economists, regardless of their politics, say a tax reduction of $1 or $2 a day would do little to help the economy and would be an especially bad idea if it worsened the budget deficit.
Within the administration, moderates like Richard Darman, the director of the Office of Management and Budget, and Treasury Secretary Nicholas Brady seem to have won out over conservatives like Vice President Dan Quayle and Jack Kemp, secretary of housing and urban development, who want much deeper tax cuts and much more costly investment incentives.
"The pro-growth wing of the administration is not very happy about the growth package," said an administration official who considers himself part of the conservative wing. "It's anemic."
But another official said Bush believed the conservatives had no real choice but to back him and that he was more concerned about losing the middle class to his Democratic challengers.
Budgets are always political documents, and that maxim is even more true in election years. For Bush, the budget this year is crucial to the image he is trying to sell to the American people.
He clearly hopes to use the budget to make several points to voters: that he is sensitive to how squeezed middle-income Americans feel, that he has a well-formed policy in areas like health and education to which his administration until now has paid relatively little attention and that he recognizes that the collapse of the Soviet Union will allow the United States to spend less on the military.
Democrats have harped on those issues on the campaign trail and in Washington, and the president feels the need to regain the offensive, his staff members say.
Other officials said three issues still were not settled: how exactly to calculate the increased personal exemption, how much detail to include about medical insurance and how extensively to specify the nature of military spending reductions beyond the next fiscal year that begins Oct. 1.
Democrats tend to favor tax credits in the range of $300 to $450 for a family. A credit is subtracted directly from the taxes owed and is worth the same to all taxpayers. Most of the Democrats would finance these credits by raising the taxes of people with incomes above about $200,000, a policy Bush rejects.

ECONOMIC PLAN\ SOME OF BUSH'S IDEAS\
A total increase of about $2,000 in the personal exemptions a family of four could claim on their income tax return.

Tax credits up to $3,000 for purchase of health insurance for the poorest Americans.

A tax break of several thousand dollars for first-time homebuyers who buy any but the most expensive houses.

Rollover of IRA funds into family savings accounts.

Tax deductions to middle-income earners making up to $60,000 for the first $3,000 they spend on health insurance.

by Archana Subramaniam by CNB