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Senate GOP Eyes Big Tax Cut

The Budget
By Juliet Eilperin
Washington Post Staff Writer
Saturday, July 10, 1999; Page A1

Senate Republicans proposed cutting taxes by $792 billion over 10 years yesterday, as they joined House counterparts in pressing for what would be the largest tax reduction since the historic Reagan-era cuts.

The plan outlined by Senate Finance Committee Chairman William V. Roth Jr. (R-Del.) would lower income taxes for nearly all Americans, regardless of how much money they make, while attempting to encourage saving by increasing the amount people can put into individual retirement accounts.

Roth and his fellow Senate Republicans appeared especially eager to blunt Democratic charges that the GOP favors the wealthy in its tax policy. Although the Senate proposal resembles an emerging House plan for an $850 billion tax cut, it differs in some important respects, including its omission of cuts in capital gains taxes for investors and in estate inheritance taxes.

"My tax cut plan, which incorporates proposals that have significant bipartisan support, would cut taxes for millions of Americans and address the biggest financial challenges faced by individuals and families," Roth said.

Roth released the plan as Congress prepared to reconvene next week, with how to divvy up what could be a trillion dollars in budget surpluses at the top of the agenda. While Republicans are pushing for deep tax cuts, President Clinton and congressional Democrats are touting increased spending on Medicare and other domestic priorities. Clinton has signaled he could live with a more limited tax cut but the kind of broad cut favored by congressional Republicans appears headed for a presidential veto.

White House spokesman Barry Toiv quickly criticized the scale of Roth's proposed cuts as "a huge risk for the country."

Still, Republican leaders are determined to pass a tax bill in both chambers by the August recess, though they face political challenges apart from securing Clinton's support.

In the House, where the Ways and Means Committee is scheduled to begin consideration of a tax bill on Tuesday, many GOP moderates are concerned about the size of the prospective tax cut. And on both sides of the Capitol, GOP lawmakers are being pressured in different directions by social conservatives advocating tax cuts for families and corporate lobbyists who favor business-oriented provisions.

Roth's plan appeared aimed in part at securing support from Senate Democrats, who are generally more favorably inclined to tax cuts than their House counterparts. His plan would boost annual individual retirement account contribution limits from $2,000 to $5,000 and eliminate income limits on IRA and Roth IRA contributions, as well as make health insurance fully deductible for anyone who does not qualify through an employer.

The proposal would offer modest tax reductions to all taxpayers by reducing from 15 to 14 percent the rate of tax levied on the first portion of taxpayers' income. In 1999, this portion amounted to $25,750 for individuals and $43,050 for couples. Under his plan, Roth estimated that a middle-class family of four would receive a $450 tax cut.

House Ways and Means Committee Chairman Bill Archer (R-Tex.) has been unveiling his own tax plan in stages over the past week. The House version includes repealing the estate and gift taxes over 10 years; reducing the capital gains tax from 20 to 15 percent; allowing private universities to offer pre-paid tuition plans like those at several public universities; and allowing tax-free Education Savings Accounts to apply to elementary and secondary school expenses as well as to college costs, while simultaneously increasing annual contribution limits from $500 to $2,000.

Archer will announce his income tax provisions today. According to committee aides, he is considering several options, including lowering the level at which income is taxed in one or more brackets, providing an across-the-board tax cut that would rise to 10 percent over 10 years, and allowing taxpayers to deduct a certain percentage from their bill at the end of their tax filings.

The emerging GOP tax plans are already drawing a range of reactions from across Washington. U.S. Chamber of Commerce lobbyist Lonnie Taylor said his group would be actively pushing for Archer's plan, which he said satisfied nearly all of the business community's concerns.

"It's bold, it's aggressive, and it's badly needed to sustain and expand the economic growth we've had," Taylor said.

House Democrats say Archer's unwillingness to negotiate with them over the details of their proposal highlights the political motivations behind the GOP's tax initiative. Rep. Charles B. Rangel (N.Y.), the top Democrat on Ways and Means, called the GOP plan "a Christmas tree that's supposed to appeal to every Republican on everything they see, that they can't afford to pay for."

"I don't think any Republican is taking this seriously. We're not," Rangel said, adding that the partisan wrangling over taxes could undermine efforts to reach a compromise on Social Security reform in this Congress. "To throw a damn grenade in the House and they say, 'Can we talk?' is hardly the approach, I think, to take."

Organizations such as the Christian Coalition are already lobbying committee members to support eliminating the so-called marriage penalty in which some couples pay higher taxes by filing jointly even if it means sacrificing some business tax cuts.

On the more liberal side, Iris Lav, deputy director of the Center on Budget and Policy Priorities, said Roth's retirement savings provisions would do little for lower- or middle-class Americans. "It's basically a tax break for higher-income people," she said.

© 1999 The Washington Post Company

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