Bentsen offers tax-cut plan aimed at the middle class

October 21, 1991|By R. A. Zaldivar | R. A. Zaldivar,Knight-Ridder News Service

WASHINGTON -- The Democratic chairman of the Senate Finance Committee proposed a $72 billion tax cut package yesterday aimed at giving recession-weary middle-class families a quick lift.

"We need a growth package, and that's what I'm offering," said Sen. Lloyd Bentsen of Texas. The economy, he warned, "is still dead in the water."

Mr. Bentsen's move comes amid rumblings that a bidding war over tax cuts may be about to begin. "You have a consensus that something should be done," said a House Ways and Means Committee staffer. "But you don't have a consensus on what that something should be."

Antsy Republicans are urging President Bush to introduce a tax cut plan soon in the hope of silencing Democratic cries that the White House is indifferent to the country's lingering economic misery. Any Bush plan is likely to include his much-desired capital gains tax cut.

In the House, activist Democrats are trying to persuade Ways and Means Chairman Dan Rostenkowski, D-Ill., to push through a middle-class tax cut. Unlike Mr. Bentsen, House Democrats seek to settle a score from the high-flying '80s by raising taxes on the rich.

Mr. Bentsen seemed more interested in economic pump priming than in class issues.

His plan would combine two proposals with populist appeal: a $300 tax credit for each child in a family under age 18 and expanded individual retirement accounts.

IRAs would be changed to allow withdrawals for buying a first home, paying college tuition and steep medical costs. Income restrictions on who can contribute to the tax-advantaged retirement accounts would end.

"One of the biggest deterrents to coming out of this recession is consumer pessimism -- they have neither the will nor the wallet to spend money," Mr. Bentsen said on CBS' "Face the Nation."

A family of four making $35,000 would see its tax bill cut by 25 percent, Mr. Bentsen said.

"This [plan] would give you a short-term stimulus for middle-income America, the worst hit in this situation," he added.

Mr. Bentsen would pay the five-year $72.5 billion tab using another popular prescription: a 5 percent cut in defense spending in each of the next five years.

"I think the taxpayers ought to have at least 5 percent . . . of that peacetime dividend that we're talking about," he said.

The plan would require changing last year's budget agreement, which permits cuts in defense spending only to reduce the deficit.

Mr. Bentsen said that he would like to see the package become law by Jan. 1. That's a difficult target to meet, because revenue bills must originate in the House and Mr. Rostenkowski is reluctant to undertake major tax changes with an arbitrary deadline adding to the pressure.

Appearing on ABC's "This Week," White House Chief of Staff John H. Sununu sidestepped a question on the Bentsen plan by putting in a plug for Mr. Bush's long-stalled capital gains tax cut.

A House Democratic leadership aide said Democrats in that chamber were committed to a middle-class tax cut but didn't want to give up the battle cry of raising taxes on the rich.

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