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Congress OKs GOP Tax Cut

Bill Archer, TWP
Rep. Bill Archer (R-Tex.) at a press conference to discuss the GOP budget agenda. (Ray Lustig The Post)

From The Post
  • Congress OKs GOP Tax Cut (Aug. 6)

    On Our Site
  • Full Coverage: The Tax Bill
  • By Eric Pianin
    Washington Post Staff Writer
    Friday, August 6, 1999; Page A1

    Defying President Clinton's veto threats, the Republican-controlled Congress yesterday gave final approval to a large tax cut on a day marked more by political positioning than lawmaking that will endure.

    The bill sailed easily through the House on a largely party-line vote but barely survived its final hurdle in the Senate, where four Republicans defected out of concern that the cut was too big and favorable to the well-to-do. In a cliffhanger, the Senate approved the plan, 50 to 49, with one Republican absent.

    The 10-year, $792 billion tax package would cut all income tax rates by one percentage point, phase out the so-called marriage tax penalty, eliminate the estate tax, reduce capital gains taxes, enhance investments in IRAs and help defray the cost of education, health care and long-term care for the elderly.

    The plan also contains billions of dollars in tax breaks for multinational corporations and scores of special-interest provisions, ranging from a research and development credit for high-tech Silicon Valley companies to a credit for electricity produced from poultry waste.

    Although the package has virtually no chance of surviving as written, House and Senate GOP leaders believe it will resonate with Americans, particularly businesspeople and family-oriented religious conservatives, and more clearly define their party's values heading into the 2000 election. And if Republicans win back the White House next year, many of the bill's provisions could eventually become law.

    "There is a dramatic difference between Republicans and Democrats in this . . . city and this is the dividing line," declared House Ways and Means Committee Chairman Bill Archer (R-Tex.), a chief architect of the plan.

    But President Clinton and congressional Democrats dismissed the GOP plan as "reckless" policy, premised on uncertain surplus forecasts. At a rally on Capitol Hill, Clinton said prospective budget surpluses have created "the opportunity of a lifetime" and insisted that Washington needs to use the money largely to shore up Social Security and Medicare. He made it clear that the GOP package will be dead on arrival.

    "For some reason, they don't want to send it to my desk," he said with a broad grin.

    Despite the president's threat, Republican leaders easily pushed their plan through the House, on a 221 to 206 vote, but then encountered strong resistance in the Senate from moderates who favored a much smaller, $500 billion plan, and conservatives troubled by excesses in the GOP plan. GOP leaders scrambled to placate members and reopened the bill late Wednesday night to add sweeteners.

    Sen. James M. Jeffords (R-Vt.) told reporters earlier that he was sorely disappointed with the compromise plan and was leaning against it. But yesterday he voted for it after GOP leaders bowed to Jeffords' demands for an additional $11.3 billion of tax concessions -- mostly in the form of marriage penalty relief for low-income couples and expanded dependent care tax credits. Sen. John McCain (Ariz.), a Republican presidential candidate, blasted the GOP plan because it was riddled with special-interest provisions but ultimately voted for it after strong lobbying from Majority Leader Trent Lott (R-Miss.) and Majority Whip Don Nickles (R-Okla.)

    But four other moderates held their ground and voted against it: Sens. Susan Collins and Olympia J. Snowe, both of Maine, Arlen Specter (Pa.) and George V. Voinovich (Ohio). Although four Democrats voted for the original Senate bill, the Democrats were united yesterday in opposing the final plan, an indication of the importance the party has attached to the issue.

    In the House, only four Republicans opposed the plan and five Democrats backed it. A provision that conditions the across-the-board tax cuts on progress in reducing the $5.5 trillion national debt proved critical in holding down moderate Republican defections.

    Among local lawmakers in both chambers, only Rep. Constance A. Morella (R-Md.) broke with her party in the final vote.

    An air of unreality pervaded the daylong debate in the Senate and House, with Clinton's veto threat hanging over the proceedings. Sen. John B. Breaux (D-La.) described the debate as "an exercise in futility" and a legislative sham. Moreover, Democrats noted that most of the provisions would be phased in slowly and then abruptly phased out in 2008 and 2009 under a "sunset" provision. Republicans, meanwhile, insisted that their plan still had a chance of enactment, noting that Clinton has repeatedly changed course before and that he might do it again.

    During the morning House debate, Rep. Lloyd Doggett (D-Tex.) berated the Republicans for allegedly showering tax breaks on special interests, including the poultry waste credit. Holding up a picture of a plucked chicken, Doggett complained that the Republicans were trying to "pluck clean" Social Security and Medicare. Dozens of Democrats seated in the chamber clucked like chickens in agreement.

    The Democrats sought to portray the plan as a sop to the rich, noting that the lion's share of the tax cut would go to higher-income taxpayers. A Treasury Department analysis that matches tax benefits with income groups shows that the compromise House-Senate tax bill tilts heavily toward the House measure, virtually eradicating the Senate bill's attempt to distribute more tax benefits to the broad middle class.

    For example, the middle 60 percent of American families -- those making from $16,400 to $82,000 -- pay about 34 percent of all taxes. They would have gotten about 33 percent of the tax breaks under the Senate plan but only 21 percent of the cuts in the final bill. The top 20 percent of American families -- those earning more than $82,000 -- pay about 65 percent of all taxes, and they would have gotten about 67 percent of the breaks in the Senate bill but would receive 79 percent of the reductions in the final measure, according to the Treasury analysis.

    But Republicans cited a rival Joint Committee on Taxation analysis indicating that the bill would provide substantial benefits for middle-income families. Republicans have been unapologetic about their tax bills' emphasis on wealthier Americans, arguing that their proposals merely distribute tax cuts to the Americans who pay the most taxes.

    "People who pay the taxes will get the tax relief," said Rep. John Linder (R-Ga.). "That's what the Democrats can't stand."

    Staff writers Michael Grunwald and George Hager contributed to this report.


    © 1999 The Washington Post Company

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