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 Clinton Offers Tax Benefits
Washington Post Staff Writer Tuesday, February 2, 1999; Page A5 President Clinton yesterday proposed an array of tax benefits targeted at middle- and lower-income households, employing a sharply different approach to taxation than congressional Republicans. In contrast to the GOP proposal for a 10 percent across-the-board income tax cut, Clinton aimed his cuts at middle-class families struggling with what he perceives as the overriding economic problems of today: education expenses, child care and long-term care for the elderly and disabled. And by reaching out with a special credit for stay-at-home mothers of young children, the president addresses complaints by some conservatives that the administration has neglected the traditional family of a breadwinner and homemaker. The Clinton plan, as described in his new budget proposals, "is targeted at moments in people's lives when they have the greatest need," Deputy Treasury Secretary Lawrence H. Summers said yesterday. And the preferred form of relief is the tax credit, rather than the more common tax deduction. Tax credits, which reduce taxes dollar for dollar, are of the same value to people in all income brackets. By contrast, deductions, which allow taxpayers to subtract certain expenses from taxable income, are more beneficial to taxpayers in higher brackets. Republican leaders and business interests applauded some of the tax breaks but argued that the result would be excessive complexity. Many of Clinton's proposals have been rejected by Congress before, and many in the GOP leadership predicted they would meet the same fate this year. House Ways and Means Committee Chairman Bill Archer (R-Tex.) called the budget a "kitchen-sink approach to government. The budget contains something for everyone and that's what's troubling." He accused Clinton of "throwing money at problems," adding that "throwing money at problems has never been the right answer." At the same time, the budget proposes increased taxes on some sectors of the economy. Tobacco would be hit hard, paying an additional $35 billion over five years. The insurance industry is targeted to contribute more than $5 billion in additional federal revenue over five years, and trade associations, one of the Washington area's largest industries, would provide the government with an additional $1.4 billion over the same period. The budget also would eliminate companies' ability to deduct the cost of paying punitive damages in lawsuits. Republicans said they counted 81 separate tax increases in the budget proposal, raising $82 billion over five years, and 37 tax cuts that would cost the government $36.2 billion – a net $45 billion tax increase. Summers, when asked about such criticisms, said the proposed tax cuts are "fully paid for," with $34 billion in revenue raisers covering $34 billion in new initiatives. Key tax elements of the budget include:
In addition, the rules covering the tax credit for out-of-pocket child care expenses would be liberalized. The maximum credit would rise to 50 percent of expenses – no more than $2,400 for two children – from the current 30 percent, and the income ceiling would be raised so that families earning up to $30,000 a year would qualify for the maximum. Families earning more than $59,000 a year would still qualify for a 20 percent credit.
For school systems, the budget would expand a program in which localities can finance construction and improvements in local schools by issuing bonds upon which the federal government in effect pays the interest. Buyers of the bonds receive no cash interest but instead get tax credits that they can use against other income.
© Copyright 1999 The Washington Post Company |
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