Tax battle opens today

House vote scheduled on GOP proposal for $800 billion in cuts

`We will have the votes'

Parties try to stake out most popular position for the next elections

July 21, 1999|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON -- With action scheduled in the House and Senate today, congressional Republicans begin what could be months of posturing, positioning and negotiating with Democrats, the White House and one another to pass a pre-election tax cut.

Last-minute Republican defections were threatened in both chambers yesterday as GOP leaders scrambled to maintain the party unity needed for victory with their narrow majorities.

The House is scheduled to vote on a GOP leadership proposal to convert the budget surplus into nearly $800 billion in tax relief over 10 years while the Senate Finance Committee is to finalize work on a proposal of similar size by its chairman, William V. Roth Jr., a Delaware Republican.

Although about 20 moderate Republicans have expressed dissatisfaction with the House leadership bill, party leaders predicted that they would be able to muster the support to pass their bill.

"We will have the votes," declared House Majority Leader Dick Armey of Texas.

The Clinton administration and Democratic leaders are pressing hard, though, to persuade lawmakers and constituents that the Republican leaders are aiming too high. The Democrats argue that a tax cut in the range of $300 billion would be more prudent and avoid the possibility of plunging government finances back into the red.

"This is about as critical a week as we'll have in this Congress," said Senate Minority Leader Tom Daschle, a South Dakota Democrat, who said the shape of the final bill will rest on decisions made at this early stage.

But there will likely be long days ahead as the House debates its version, the Senate votes on its approach, and the two are combined into a joint measure for consideration by President Clinton.

Republican leaders are determined to send a bill to the White House before a monthlong recess scheduled to begin Aug. 6. But even if they do, a presidential veto likely awaits the bill if it arrives in its current form.

"The president first and foremost is determined to have an appropriately sized tax cut," said Treasury Secretary Lawrence Summers.

Clinton has proposed a targeted tax cut of about $250 billion and vowed to veto anything in the $800 billion range.

There are hints of where the size of the tax cuts might end up. Moderate Republicans and Democrats in the House and Senate are offering compromise proposals of about $500 billion.

"What does that tell you? I think it tells you we're going to have a tax cut," said Rep. Michael N. Castle, a Delaware Republican who wrote the moderates' tax cut proposal in the House. "All we're talking about now is how much and when."

Details of which taxes will be cut will be among the last to be settled.

Republicans generally favor an across-the-board cut in income tax rates, along with reduction or elimination of the estate tax and the so-called marriage penalty on two-income families.

Clinton and the Democrats would more sharply target the tax cuts for specific purposes, such as encouraging retirement savings and helping with college tuition.

A groundswell seems to be building in both parties to provide full tax deductions for premiums on health insurance and long-term care policies.

Saying that it is too early to settle on such details, John B. Breaux, the Louisiana Democrat who wrote the bipartisan moderate proposal in the Senate, isn't bothering to fill in those blanks on the $500 billion proposal he plans to unveil today.

Breaux's proposal has attracted the support of two Republicans and six other Democrats.

A major point of dispute between Republicans and Democrats is the amount of the anticipated surplus that would be devoted to paying off the $3 trillion federal debt and shoring up Medicare.

With a surplus of nearly $1 trillion expected over the next 10 years -- not counting nearly $2 trillion in excess Social Security taxes -- Republicans argue that Americans are being grossly overtaxed. The House GOP leadership proposal would devote none of the $1 trillion to debt reduction.

"There is no excuse for not approving a tax cut of nearly $800 billion," said Sen. Connie Mack, a Florida Republican. He said the Clinton administration wants a smaller tax cut simply so the remainder can be spent on government programs.

But treasury chief Summers contended that paying off the federal debt would have the same effect as a tax cut because it would eliminate interest charges that now make up nearly a quarter of the annual federal budget -- potentially lowering interest rates and benefiting taxpayers.

The Clinton administration and the GOP have proposed a bookkeeping device that would use the Social Security surplus to convert $2 trillion in government debt held by the public into debt held by the government.

But moderates such as Castle contend that this approach would not eliminate the debt. They argue that paying down the debt should get higher priority than cutting taxes.

Political considerations affecting next year's battle for control of Congress and the 2000 presidential campaign are woven deeply into the maneuvering over tax cuts. Both parties hope to distinguish themselves by adopting the most popular position.

"Perhaps this is the time for a partisan debate," said Sen. Frank H. Murkowksi, an Alaska Republican.

Pub Date: 7/21/99

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