Giuliani says Bush should cut spending

ORLANDO, Florida (Reuters) - U.S. presidential hopeful Rudy Giuliani, campaigning on what he calls the biggest tax cuts in U.S. history, on Tuesday criticized Democratic economic stimulus plans to prevent a recession and said the key to U.S. competitiveness was to quickly cut corporate taxes.

In an interview with Reuters on a campaign swing through Florida, the former Republican mayor of New York, also urged the Bush administration to trim spending, saying he would ask nonmilitary government agencies to cut spending by 10 percent.

In his aggressive tax-cut program announced last week, Giuliani called for a reduction of the U.S. corporate tax from 35 to 25 percent, elimination of the estate tax and a reduction of capital gains tax from 15 to 10 percent.

He is promoting a one-page income tax form that culls tax brackets to just three -- 10, 15 and 30 percent -- which he said will save a typical, middle-income family of four with $80,000 yearly income about $3,000 annually.

Giuliani, seeking to become the Republican candidate in the November presidential election, has repeatedly declined to speculate on whether the wavering U.S. economy is headed for recession.

But he said he would advise Washington to immediately move to extend the Bush tax cuts and to slash the corporate tax, which he says hurts American businesses' ability to compete.

"The corporate tax cut will definitely result in increased revenue, because the trick to being a strategic tax cutter is to pick on the taxes that are the most anti-competitive and reduce those first," he said. "And the corporate tax is one of the most anti-competitive in the world."

Extending the tax cuts President George W. Bush enacted early in his administration, which are due to expire in 2010, would send a clear signal to foreign investors planning investments four or five years down the road, Giuliani said.

"I believe there are a certain number of people, businesses, institutions that have to be discouraged about investing in the United States because they see such a large, major balloon in taxes down the road," he said.

Economic stimulus proposals from Democratic presidential contenders Hillary Clinton and Barack Obama, which focus on small tax rebates or credits to put cash in consumers' pockets quickly, send the wrong signal, he said.

'GIVEAWAYS'

"It's a giveaway program. It's a typical Democratic giveaway program. As a giveaway program the amount of dollars it involves would have very little impact other than to slow the growth of the economy," he said.

"The Democrats are talking euphemistically about the idea that the Bush tax cuts will expire. The American people have to realize that the Bush tax cuts expiring become the largest tax increase, maybe, in American history."

Giuliani was unable to immediately provide figures on how much his tax-cut program would save U.S. taxpayers, or cost the Treasury.

Some economists have blamed the Bush tax cuts, coupled with increased military spending for wars in Iraq and Afghanistan, for helping end a brief period of government budget surpluses under the President Bill Clinton's administration.

"I believe that you have to try to cure deficits," Giuliani said. "I believe you have to have a goal of balancing the budget."

"Yes, we have deficits, but, no the deficits are not as great as were predicted when the Bush tax cuts were being enacted."

Giuliani, who advocates a "substantial" increase in the size of the U.S. military, said lost government revenue from aggressive tax reductions would be replaced in part by increased economic activity.

"We reduced the income tax rate in New York City over a series of years by 24 percent," he said. "Receipts from the income tax went up 48 percent."

But he said the cuts should be coupled with spending cuts. His plan calls for replacing only one of every two federal government employees who retires. "That can get you about $22 billion a year ... once you start doing it."

Giuliani said he would impose 10 percent spending target reductions on every civilian government agency. "It shows the rest of the world that we are returning to focusing on fiscal discipline," he said.

(Editing by David Wiessler)

(For more about the U.S. political campaign, visit Reuters "Tales from the Trail: 2008" online at blogs.reuters.com/trail08/)