Troubles await election-year tax cut House passage: $80 billion plan by Gingrich Republicans faces uphill Senate fight and possible veto.

October 02, 1998

YOU CAN TELL it's an election year when politicians start promising voters oversized tax cuts. That's certainly the case in Washington, where politically ambitious House Republicans pushed through an $80-billion tax reduction plan just five weeks before the November elections.

Inequities in the "marriage-penalty" provision of the tax code would be eliminated and individuals with large fortunes (up to $1 million) would be exempt from estate taxes. Big business would catch some breaks, too.

But at what price? Democrats contend Republicans would be cutting taxes at the expense of the Social Security system. They argue, with considerable justification, that the federal government's projected $1.5 trillion surplus over the next 10 years consists of excess payroll tax payments for Social Security.

If Republicans use a portion of this money to cut taxes, it means big trouble down the road in paying for Social Security.

That makes moderate Senate Republicans nervous. Indeed, it makes most senators uneasy. That's why the House-passed plan stands little chance in the Senate this session. The best GOP senators hope for is passage of a modest $6 billion tax reduction. Even then, President Clinton stands ready with a threat to veto the measure.

House Speaker Newt Gingrich and his Republicans may have been caught in a trap of their own making. The president, in announcing a $70-billion budget surplus this week, pounced on the GOP tax-cut plan as endangering the stability of Social Security. It's the perfect diversion for a besieged president and an ideal campaign vehicle for worried Democrats.

At this stage, senators would be better off shelving the bill. The size of any 10-year federal surplus is uncertain. It could disappear in a hurry if problems in the Far East, Russia and Latin America worsen dramatically.

Moreover, both the president and his foes in Congress have failed to respond to a crucial question: What's the best way to keep Social Security solvent?

Finding an answer should happen well before talk of lowering taxes is taken seriously.

Pub Date: 10/02/98

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