House leaders coming up short on tax-cut bill

April 05, 1995|By Thomas W. Waldron and Karen Hosler | Thomas W. Waldron and Karen Hosler,Washington Bureau of The Sun

WASHINGTON -- House Republican leaders scrambled last night to find the last few votes they need to win approval today of a $189 billion tax-cut bill, the final plank of the "Contract with America."

A small group of holdout Republicans was trying to hold up action on the tax-cut plan for two main reasons: Some are resisting a provision that would pay for the tax cuts, in part, by requiring federal workers to contribute more toward their pensions; others oppose giving tax breaks to upper-income families with children.

As of last night, GOP leaders said they were five votes short.

But they expressed confidence that they could secure the last few votes through persuasion rather than by making any further concessions.

"Now comes the time to beg," House Speaker Newt Gingrich said yesterday at a rally for Republican House members.

He urged their support for the tax measure, noting that it was "the last hurdle" before completion of the House Republicans' contract.

Lawmakers from the Washington area and elsewhere complained that the proposed pension changes amounted to a tax increase on federal workers, 300,000 of whom live in Maryland.

The provision would increase federal employees' contributions to their pensions, from 7 percent of salary to 9.5 percent.

"This is supposed to be a bill to reduce taxes," said Rep. Constance A. Morella, a Republican whose Montgomery County district includes thousands of federal workers.

"Why do you put an increase on one group of people? Why should they be singled out for this extra burden?"

House Republicans hope to pass the tax-cut bill, the so-called "crown jewel" of their contract, this week before adjourning for Easter break.

House Republicans had promised to bring to a House vote all provisions in the contract within the first 100 days of Congress, which will elapse during the break.

But some Republicans, such as Rep. Thomas M. Davis III of Virginia, said they would vote against the tax bill if it includes the pension changes, which they say would hurt federal workers.

"People in my district don't consider it a crown jewel," Mr. Davis said.

"To them, it's more like a rock through the window."

The tax-cut bill would give a $500-per-child tax credit to families with incomes of up to $200,000 a year.

Republican leaders, sticking to the pledge they made in their contract, refused a request from 102 moderate Republicans to lower the income threshold to $95,000.

The measure would also cut the tax on capital gains by 25 percent, create new individual retirement accounts and repeal the 1993 tax increase on Social Security recipients.

In all, the bill would return $189 billion to taxpayers over five years.

Trying to achieve the tandem goals of tax relief and a balanced budget, GOP leaders last month put together a package of spending cuts to offset the lost revenue from the tax cuts.

The package included $64 billion worth of cuts to federal welfare programs and another $100 billion in unspecified reductions.

The pension changes, which would result in a net savings of about $11 billion over five years, are a smaller piece of the package.

Besides the increase in employee contributions, the House plan would effectively reduce retirement checks by basing pension calculations on an employee's five highest years of salary rather than the more lucrative three highest years.

The changes would affect about 2.1 million federal employees.

A federal worker earning $40,000 would see his or her pension contribution increase by $1,000 a year, under the Republican plan.

Members of Congress and their staffs would also pay more. Their contributions would rise from 8 percent to 9.5 percent.

Lawmakers wrangled behind the scenes yesterday over the rule that House leaders proposed to govern debate on the tax-cut bill.

GOP leaders were working to find the 218 votes needed to approve the ground rules.

Rep. Robert L. Ehrlich Jr., a Baltimore County Republican, said he was eager to vote for the tax-cut bill but wanted a change in the rule to allow for a separate vote on the pension issue.

If that demand wasn't satisfied, Mr. Ehrlich said, he would buck House leaders and vote against the rule.

Mr. Ehrlich said he recognizes a need to reform the federal pension system.

But he said he wants any money saved to be put into the pension trust fund, not used for financing tax cuts or other purposes.

"I love the bill except for this provision," he said.

In a meeting yesterday, Ms. Morella, Mr. Ehrlich and several other Republicans tried unsuccessfully to persuade Mr. Gingrich to allow a separate vote on the pension issue.

Leaders of federal employee unions, meanwhile, accused Congress of breaking agreements with federal workers.

"We strongly oppose any changes to the retirement system, particularly changes that would increase contributions, to find money to give a tax cut to the rich," said Diane Witiak, spokeswoman for the American Federation of Government Employees, which represents 700,000 federal workers.

The pension proposal faces an uncertain future in the Senate.

At a White House news conference, President Clinton criticized the overall tax-cut measure but stopped short of threatening a veto.

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