GOP links tax, spending cuts

April 04, 1995|By Los Angeles Times

WASHINGTON -- House Republicans, sweeping aside a major barrier to the tax bill that is scheduled for a vote this week, have agreed to link their tax cuts to the goal of eliminating the federal deficit.

Under the agreement reached yesterday, an array of proposed tax cuts aimed at families with children and businesses would not take effect unless Congress approves a spending plan this year that promises a balanced budget by 2002.

"This will hold Congress' feet to the fire," said Rep. Fred Upton, R-Mich., one of the members who supports tax cuts only with deficit reduction. The version of the bill approved by the House Ways and Means Committee made no connection between the tax cuts, estimated to cost $189 billion over five years, and a balanced budget.

The separate issue of whether families with incomes of up to $200,000 should qualify for a $500-a-child tax credit remains a sticking point, although House Republican leaders predicted that the entire plan is close to passage.

"We're close and confident -- in the end, we'll be there," said House

Speaker Newt Gingrich, R-Ga. He predicted that the bill is within six votes of the 218 it needs to pass the House.

The proposed tax cuts, which are cornerstones of the House GOP "Contract with America," have been hailed by their supporters as good medicine for the economy and good news for working Americans.

Critics have attacked it from several directions. Congressional Democrats and the Clinton administration have complained that its benefits would be skewed toward the rich. Many Republicans worry about its impact on the economy and the deficit.

Vice President Al Gore, beginning a week-long White House assault on the Republicans' first 100 days in control of Congress, denounced the GOP tax plan as a "royal rip-off" and "Robin Hood in reverse."

The top 1 percent of taxpayers, earning $350,000 or more, would get an average of $20,000 a year in breaks, Mr. Gore said. Taxpayers with incomes of $10,000 would get $90 a year.

"Take from the kids, take from education, take from protecting our water, take from all the programs that actually help our hard-working, middle-income American families and give it to the wealthiest in the country," he said.

Sen. Bob Packwood, R-Ore., criticized the proposed $500-a-child tax credit as "terrible tax policy, terrible economic policy" because it would encourage consumer spending instead of household savings, which is what many economists believe the economy needs. Mr. Packwood is chairman of the Senate Finance Committee, which will have a chance to rewrite the House tax bill.

Mr. Packwood and other key GOP lawmakers, along with an increasing number of Senate Democrats, want to enact spending cuts before granting tax relief.

A group of House Republicans attempted to link passage of the tax cuts to spending reductions that would take the deficit to zero by 2002. The challenge by the deficit hawks had delayed the tax-cut plan and exposed rifts within Congress' Republican majority.

Under the plan agreed to yesterday, House leaders approved a diluted version of the demand that precise spending cuts, large enough to balance the budget in seven years, accompany the tax bill. The compromise would merely set a path toward a balanced budget and require Congress to pass sufficient spending cuts each year to stay on the path.

"I would say that the concerns that these folks had have been addressed," said House Budget Committee Chairman John R. Kasich, R-Ohio. "This says we will not have tax cuts unless we are good to our word" on spending cuts.

Separately yesterday, Mr. Gingrich and Senate Majority Leader Bob Dole, R-Kan., announced the creation of a "National Commission on Economic Growth and Tax Reform" -- all but ensuring a vigorous debate during the 1996 presidential campaign on the issue of tax fairness.

The nine-member commission, which is to make its recommendations by September, is chaired by Jack Kemp, an ardent champion of the flat tax.

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