DOLE OFFERS TAX CUT PLAN : 15% PERSONAL REDUCTION URGED DOLE TO PRESENT TAX PLAN IN CHICAGO.

Byline: Adam Nagourney The New York Times

After weeks of debate among his advisers, Bob Dole has settled on the economic and political foundation of his presidential campaign - a $548 billion tax-cut package highlighted by a 15 percent reduction in individual income tax rates and a halving of the capital gains tax, campaign officials said Sunday.

Dole plans to go to Chicago today to present the package, which his aides described Sunday as the single most critical component to reviving his prospects against President Clinton.

Dole will call for a 15 percent across-the-board reduction in personal income tax rates, starting in 1997 and spread over three years. He will also advocate cutting the capital gains tax to 14 percent, from 28 percent; endorse a Republican congressional proposal to provide a $500-a-child tax credit for families; and call for increasing the allowable contribution to Individual Retirement Accounts by nonworking spouses.

He will also support repealing the Clinton administration's 1993 tax increase on upper-level Social Security benefits.

Aides to Dole offered only sketchy details Sunday on how he would pay for the package. But the aides said $145 billion, or about 27 percent, of the cost of the tax cuts would be covered by new revenue created by the economic growth resulting from the cuts - a figure that the aides put at the conservative end of estimates by economists.

With this decision - which forced Dole to wrestle with competing Republican factions over how he should approach both the economy and his campaign - he has settled on the most politically aggressive and clear-cut of the economic plans that were presented to him.

In advocating a comparatively simple across-the-board tax cut, Dole is adopting a political strategy that has become a steadfast element of national Republican campaigns since Ronald Reagan's election in 1980. A similar pledge was at the heart of Christie Whitman's successful campaign against Gov. Jim Florio in New Jersey in 1994.

``Dole needed a wedge issue where he could draw an unambiguous distinction between him and Clinton,'' said Bruce R. Bartlett, a former Treasury official in the Reagan and Bush administrations who was among the first to suggest the 15 percent across-the-board tax cut.

``The challenge to Dole is to convince the American people he means it and will do his best to see it enacted if elected. One of the biggest problems he's got to overcome is the feeling among the American people that politicians always promise candy at Christmas and don't deliver.''

The Dole campaign was keenly aware that the plan carried not only political promise but also high political risk. The prolonged debate seesawed through Saturday afternoon, when Dole finally signed off on the 15 percent plan.

During 35 years in Congress, Dole framed his political career as an advocate of reducing the deficit. He has been among his party's most caustic critics of supply-side economics, which asserts that tax cuts produces enough economic growth to offset losses in tax revenues.

Even as Dole was weighing an across-the-board tax cut against rolling back the 1993 tax increase, an approach that other advisers had urged, Clinton's re-election team was distributing to reporters quotations in which Dole disparaged supply-side economics.

The effort by Clinton's campaign was intended to rattle Dole, but the White House's intense concern with the issue suggests nervousness in Clinton's camp over an issue that has historically proved highly effective for Republicans.

The president is particularly vulnerable on this issue, in the view of Dole's aides, because Clinton ran in 1992 on the promise of pushing a middle-class tax cut and, after taking office, abandoned that pledge to instead push for measures to close the budget deficit. In fact, he pushed through an increase in taxes over the objections of Republicans.

Joe Lockhart, the Clinton campaign spokesman, said of Dole's plan, ``It appears Bob Dole is taking the political route that will balloon the deficit, hurt long-term economic growth and destroy his own credibility - all in one speech.''

The tax cut plan is part of an overall economic growth program that is titled ``Restoring the American Dream: The Dole Plan for Economic Growth.'' It also calls for reducing federal regulations, a staple for Dole on the campaign trail, and adopting Republican legislation, vetoed by Clinton, to change the way civil lawsuits are handled by the courts. Dole's aides argue that this change would improve the nation's business climate.

The tax cuts, though, are the heart of the plan. Dole will call for a 15 percent reduction in existing tax rates - 5 percent a year - starting in 1997. His aides said that would affect about 90 million taxpayers. Tax rates now vary, depending on income, from 15 percent to 39.6 percent. Under Dole's plan, each of those rates would be cut 15 percent.

Under the Dole plan, taxpayers paying the bottom rate of 15 percent in federal income taxes would see their rate fall to 12.75 percent. Those paying a rate on their last dollar earned of 28 percent would have their rate go down to 23.8 percent. Those paying 31 percent now would pay 26.35 percent under the Dole plan, with the current 36 percent bracket declining to 30.6 percent and the 39.6 percent bracket falling to 33.66 percent.

Significantly, Dole did not embrace the position of a former rival for the Republican presidential nomination and now an economic adviser, Steve Forbes, for a single flat-tax system.

Aides to Dole said he would instead promise to work toward simplifying the tax system. Forbes, who based his entire campaign for the nomination on a call for a flat tax, is scheduled to travel with Dole to Chicago.

Although Dole has frequently called for sharp restrictions on the power of the Internal Revenue Service, his plan stops short of that. Instead, it calls for enJding filing requirements for about 40 million low- and middle-income taxpayers, on the assumption that the agency would be able to adjust automatic withholding so that it is accurate enough that there is no reason for a taxpayer to file a form.

A large part of the cost of the plan would be covered by what economists call feedback, or the amount of increased tax revenue created by the tax cut. In this case, the figure is about 27 percent, or $145 billion. Dole would also raise $37 billion with the sale of unallocated broadcast spectrums, and $60 billion with a 10 percent cut in administrative cuts in nonmilitary programs.

DOLE'S ECONOMIC PLAN

A look at the five major points of the economic plan GOP presidential candidate Bob Dole will release today.

BALANCED BUDGET: Promises to balance the federal budget by 2002 and push for adoption of a constitutional amendment requiring a balanced budget.

TAX RELIEF: Calls for a 15 percent across-the-board tax cut, which Dole campaign advisers said would mean lower taxes for 90 million Americans. Also, a $500 per-child tax credit, a cut in the capital gains tax from 28 percent to 14 percent and repeal of the 1993 Clinton administration tax increase on certain Social Security benefits. The total value of the tax package is $548 billion over six years.

Also, promises legislation to replace the current tax code with a flatter, fairer, simpler system that does not increase taxes on middle-income Americans.

IRS REFORM: Includes a provision to end the Internal Revenue Service filing requirement for roughly 40 million low- and moderate-income Americans. Under the plan, the IRS would fine tune its payroll withholding formulas so those who now use the simplest tax forms would have the proper amount withheld from their paychecks and not have to file an annual tax return. Taxpayers could choose to file a return if they wanted to, or if they had deductions that would earn them a refund.

REGULATORY AND LEGAL REFORM: Establishes a regulation sunset task force co-chaired by the director of the Office of Management and Budget and the Small Business Administration, who would report directly to the president. The panel would evaluate all federal regulations with an eye on easing the regulatory burden on small businesses.

EDUCATION AND TRAINING: Proposes a $2.5 billion program called ``Opportunity Scholarships.'' Modeled after the GI Bill, it would allow recipients to apply their funds to their choice of public, private and religious schools. States would match the federal contribution. Also, Dole will propose consolidating more than 80 federal job training programs into a voucher program. Those eligible for training would take the vouchers to private employers for training.

OTHER DETAILS:

Growth: The plan projects annual economic growth of 3.5 percent a year, but the spending and revenue numbers are based on more modest Congressional Budget Office projections.

Revenues: The plan projects that increased economic growth resulting from the tax cuts and other effects of the plan, including improved taxpayer compliance, would generate $145 billion in new federal revenues - or 27 percent of the package's total price tag.

Paying the bill: To make up for additional lost revenues, Dole would:

Raise an estimated $37 billion through Federal Communications Commission broadcast spectrum sales.

Order a 10 percent reduction in administrative expenses in nondefense discretionary programs, for an estimated $60 billion in savings.

Dole has also in the past called for eliminating four Cabinet departments: Housing and Urban Development, Commerce, Education and Energy.

Associated Press 

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