WASHINGTON
POSING AN interesting challenge to the Democrats running for president, Treasury Secretary John Snow last week dusted off yet another package of tax cuts for the you-know-who that President Bush would love to make part of his reelection year agenda. So many highest-income shelters to create, so little time.

Coming after a third round of goodies last spring and an autumn crammed with corporate scams (from the oil and gas boys to health insurance companies), the next round is designed to slip through the back door a virtual exclusion of investment income from taxation.

The rhetoric will be all about promoting saving, but the reality will be something quite different -- part of a careful rearrangement of the tax burden, as Senator John Edwards likes to say, away from wealth and onto ordinary income (the kind you work for).

Edwards has been getting favorable attention in recent weeks for arguing that it will not do, it is not enough, for Democrats simply to get angry at this unprecedented looting of the Treasury for the benefit of those who can afford four grand per couple for Bush's reelection campaign. It is a soft jab at Howard Dean's movement, which the former Vermont governor led in an angry chant -- "You have the power" -- at the big weekend party dinner in Des Moines.

The North Carolina senator argues that presenting alternatives is a more effective way to attract support. It is such an appealing point that Senator John Kerry joined him in making it, to equally favorable notice, at the same Iowa dinner. This could catch on.

Where family finances are concerned, the Edwards approach yields an interesting comparison. What Bush wants was actually included in his budget last winter, forgotten for other tax-cutting priorities, but is now being readied for high-profile resubmission.

The president wants to replace the current array of savings incentives -- retirement accounts, special purpose funds (like for college), and worker-employer plans -- with three basic funds.

In each case, the top limits on what can be put into these essentially tax-free vehicles would be raised enormously. For retirement funds, for example, up to $15,000 a year could be socked away by a couple with no tax on the accumulating earnings and no tax on withdrawal after the age of 58. For basic investment accounts there would be no tax period.

There's a catch, however. To deal with part of yet another huge addition to the budget deficit, the tax deductibility of retirement contributions -- a major help for Americans of moderate means -- would be eliminated. As it is, most workers are lucky to be able to put anything close to the current maximum into things like IRAs and 401(k) plans on the job.

Edwards can do the anti-Bush riff in a few sentences. This is classic class warfare, only in reverse. It is a backdoor way to exclude gobs of investment income for very well-off people at the direct expense of the less well off. It is outrageous.

However, Edwards also likes to discuss the real world most Americans live in. In this world, two incomes (largely static of late) are barely keeping up with rapidly rising basic expenses. Virtually no saving is occurring as families scramble to cover necessities. As debt piles up (the percentage of income in credit card debt has tripled), home foreclosure rate and bankruptcies have soared (another sharp increase was reported just last week).

It might make sense, in other words, if Democrats concentrated a little less on their anger and a little more on addressing these painfully real problems, which Edwards does in five ways:

A savings incentive for normal people in the form of a dollar-for-dollar government match of money put into savings up to an income limit of $50,000, roughly the median household income.

An exclusion from income tax of the first $1,000 of realized capital gains income and of the first $500 in stock dividends, another idea targeted carefully at the middle.

A government match in the form of a tax credit of up to $5,000 for either a down payment on a residence or mortgage payments. According to housing experts, this would fit another 2 million people into their own dwellings, still the most important investment ordinary Americans will make.

An assault on the so-called predatory lenders who are feeding off the widespread financial problems of working families -- from check-cashing "services" to credit card companies' interest rate scams, to new and usurious personal loan schemes.

Like Joe Lieberman and Kerry -- and unlike Dean and Dick Gephardt -- Edwards wants to keep the tax cuts of recent years that primarily benefit working families (and were Democratic ideas to begin with). These include the higher child tax credit, the 10 percent income tax rate, and a more broadly applicable 15 percent rate.

The political danger in this kind of campaigning is that it risks being a little more boring and a little less angry and rhetorical. The benefit is that it addresses the problems real people face and makes a powerful contrast to Bush's priorities. At a minimum, it is what is supposed to happen in presidential campaigns.

Thomas Oliphant's e-mail address is oliphant@globe.com.
© Copyright 2003 Globe Newspaper Company.

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Posted: November 28, 2003