ECONOMIC CLASS WARFARE, Capitol Hill-style, was fully joined yesterday as Democrats filed their alternative to the tax-cut proposals of the controlling Republican majority on the House Ways and Means Committee.
In the shorthand that politics requires, the Republicans are tilting to the wealthy and the Democrats to the poor, with both parties really aiming for the allegiance of the vast, voting middle class.
In actuality, the struggle is far more complicated. The GOP is split between economic conservatives (Wall Street) obsessed with capital formation and investment returns and social conservatives (Christian Coalition) seeking child tax credits even more generous than President Clinton's proposals. Among the Democrats, a surprisingly strong faction has emerged in favor of capital gains and estate tax cuts -- this, to the dismay of old-fashioned liberals who worry about wealth disparity.
Somewhat lost in the din of partisan Capitol Hill battle are lonely ,, deficit hawks in both parties. Fearing a budget crisis as Medicare and Social Security costs soar after baby boomers start to retire in just over a dozen years, these brave lawmakers dare to question whether there is any rationale for any tax cuts when the U.S. economy is flourishing.
While the basic fix for a net $85 billion tax cut over the next five years was established in the March balanced-budget agreement, the differences between the parties and within parties are not insignificant:
Is a 17-year phased increase in the estate tax exemption from $600,000 to $1 million an outrageous boondoggle for the very rich or is it so incremental it will not save endangered family farms and businesses?
Should the $500-per-child tax credit apply only to youngsters up to 13 years old or through the 17th year?
What is the justification for sweetening Individual Retirement Accounts when they already encourage a tidal wave of investment in the surging stock markets?
And what are citizens to think as Democrats appeal for even deeper cuts in capital gains tax rates than the GOP call for a reduction from 28 percent to 20 percent?
Where the Republican House plan falters is in the way its tax cuts project a federal revenue loss of only $8.7 billion in the next five years but $104.6 billion in the following half-decade. This is back-loading with a vengeance. House Democrats, with the help of creative accounting, claim their revenue losses are more evenly distributed. Perhaps. But the major danger is a tax-cut feeding frenzy just as a huge revenue windfall tempts Congress to turn on the spending spigot.
! Pub Date: 6/12/97