Familiar tax cuts, different strategy

Internet tax vote set

GOP divides agenda in hope of small wins

May 10, 2000|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON -- The House is expected to easily approve today a five-year ban on federal, state and local Internet taxes as part of a scaled-back, election-year tax relief drive that Republicans hope can avoid a presidential veto.

Other elements of the loosely woven, still developing effort include repeal of the earnings limit for Social Security recipients, which became law last month, and a reduction of the so-called marriage penalty on two-earner couples, which is stalled in the Senate.

Even when combined with additional proposals to repeal a century-old federal tax on telephone service, provide tax credits for education savings, and other tax relief, the GOP 2000 agenda pales beside the 10-year, $792 billion tax cut legislation President Clinton vetoed last year.

Republican leaders have trimmed their ambitions to a total federal tax cut of about $150 billion over five years, spread among a half-dozen or more separate bills. They figure this approach will make each individual proposal more difficult for the president and congressional Democrats to resist.

So far, says House Majority Leader Dick Armey, "I think it's working great. We believe we are hitting the injustices in the tax code that the American people believe are destructive to progress, or just plain unfair."

Repeal of the earnings limit on Social Security, a 30-year GOP goal and an element of last year's vetoed bill, passed both houses unanimously before President Clinton signed it into law. At a cost of $22 billion over 10 years, which will come from the Social Security surplus, the new law means a boost of about $8,000 a year to 631,000 workers between 65 and 69.

Forty-eight House Democrats - one fourth of the total, many of them in close re-election contests - joined the Republicans in voting 268 to 158 to ease the marriage penalty by $51 billion over five years.

Clinton endorsed the concept earlier this year, though last year's vetoed bill included a similar reduction in the marriage penalty. But it was the magnitude of the tax package, much more than its individual elements, that triggered that veto.

A five-year ban on Internet taxes - and repeal of existing taxes in 10 states - is expected to pass the House today by more than 300 votes, and be followed within weeks by votes to eliminate the 3 percent tax on telephone service and to expand tax credits for education savings accounts. Other tax cut measures may follow.

The tactic of spotlighting individual tax cut proposals "is brilliant, and very successful," said Grover Norquist, president of Americans for Tax Reform, which tilts toward the GOP. "The only thing people knew about the tax bill last year is that it was big. That's why there wasn't much pain for Clinton in vetoing it."

Rep. Charles B. Rangel of New York, the senior Democrat on the House Ways and Means Committee, is skeptical of the tactic. He said he suspects the Republicans would actually prefer to have tax cuts vetoed because -except for the earnings limit bill - they haven't negotiated with him or the White House.

"It's the eleventh hour, I guess they've got to do something to create some excitement," Rangel said.

Moving tax cut bills in smaller, separate chunks doesn't work so well in the Senate, which is more vulnerable to parliamentary delaying tactics. For example, Democrats are blocking a vote on the marriage penalty bill, to which Senate Republicans added so many other features that they drove up the cost by three times the House version.

Yet prospects remain that a compromise may be struck as the November elections approach. If not, Sen. Larry E. Craig of Idaho, a member of the Senate GOP leadership, said Republicans would find some way out of the procedural snarl and bring the marriage penalty bill to a vote. But they may be forced for procedural reasons to combine it, reluctantly, with other tax cut measures.

"There's no question that when there develops a public knowledge about a given tax bill or bills and then all of a sudden you bundle them all together, they have less impact," he said.

Strictly speaking, the five-year moratorium on Internet taxes being voted upon by the House today is not federal tax relief because the federal government has never levied any fees on Internet service. The bill is an extension of three-year moratorium that has already been in place for two years.

The measure is designed in part to appeal to the high-tech industry, a lucrative source of campaign contributions.

"We don't want to stifle the engine that is driving the growth of our economy," said Rep. Robert W. Goodlatte, a Virginia Republican who is a lead backer of the measure. The new bill goes further than the current law by repealing taxes on Internet access fees now imposed in 10 states: Connecticut, Montana, New Mexico, North Dakota, South Dakota, Ohio, Tennessee, Texas, Washington and Wisconsin.

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