The GOP Congressional Agenda
The $792 billion Republican tax proposal that passed Congress just before the August recess continued to dominate debate after members left town. Despite his threat to veto the bill, President Clinton told governors that he hoped to reach a compromise on taxes this fall. A recent study called the Republican plan a boon to 401(k) plans and retirement savings, but critics charge the plan will more heavily favor the wealthy.
Four-term Rep. Rob Portman (R-Ohio) is a member of the House Ways and Means Committee, which oversaw the tax bill. Portman answered your questions about the tax plan, retirement savings and the GOP congressional agenda Thursday, Aug. 12. The transcript follows:
washingtonpost.com: Good morning, Rep. Portman, and welcome. Can you tell us a little bit about what you expect to happen after Congress returns from recess? President Clinton has both threatened to veto the GOP tax plan and publicly said he hopes for further negotiation and resolution.
Rep. Rob Portman: It depends on the president's willingness to consider tax relief as part of the $3 trillion projected surplus. I believe that once the American people understand the alternatives better, it's likely that there will be pressure for substantial tax relief, and that negotiations will take place. I certainly hope we can come up with a reasonable compromise.
Tampa, Fla.: Why is immediate tax relief so important when debt reduction will help the current economy and current and future generations? Why couldn't tax relief occur once we are sure the debt is taken care of?
Rep. Rob Portman: We should both reduce the debt and allow people to keep some of their own hard-earned money. With a $3 trillion projected surplus, we can and should do both. Under the plan Congress passed, $2.2 trillion of the $3.6 trillion public debt would be eliminated. This would result in our debt being relatively low as a percentage of our economy, and that's good for everybody.
The president's plan reduces less debt, and increases government spending more instead of tax relief.
It should be noted that the biggest part of the Republican tax relief plan (the across-the-board tax relief) is subject to a "debt trigger," meaning that it only goes into effect if we reach the debt-reduction targets in the plan.
Oxford, Ohio: The president says he wants universal savings accounts as the main portion of his tax relief package. What are they? Does the president still want to invest Social Security money in the stock market?
Rep. Rob Portman: First, USA accounts are retirement savings accounts that the government would fund. My biggest concern about the USA accounts is the fact that the government would be taking the place of private funds that are now used to prepare for retirement, primarily through employer based pension plans. A better alternative much more cost-effective for the taxpayer is to allow every American to save more tax-free for their own retirement, rather than creating another government entitlement program. One of the best things about the Republican tax bill is the pension expansion provisions, which allow everyone to save more for their own retirement through 401Ks, IRAs and other pension plans. This seems to be a more sensible way to achieve the president's goals.
With regard to the president's plan to invest Social Security Trust Fund surpluses in the stock market, this is part of the president's plan that he talked about in the State of the Union address. His idea is to have the federal government make these investments, which would result in the federal government being the single largest investor in our economy. This plan hasn't been particularly popular among Republicans or Democrats. My own view is that achieving the much higher rate of return in the private markets is a good idea, but the investments must be directed by individuals, not the government. And there must be a safety net for everybody so that no one's Social Security benefits would be reduced. There are plans like that out there, the best known being the so-called Archer-Shaw plan.
Washington, D.C.: Much of your pension bill, that was incorporated into the tax bill, had broad bipartisan support. Can you tell me what's in it for the average worker?
Rep. Rob Portman: The average worker who has a pension will be able to save more for his or her own retirement. And, if that worker is in a defined-benefit plan or a multi-employer plan, will be able to get a greater benefit from the existing pension. The most dramatic benefit, though, will be for those workers who currently have no pension plan of any kind 70 million workers, or half of the work force. The pension provisions in the Republican tax relief plan are targeted to these workers too, by dramatically expanding the availability of pensions through creating more incentives for companies (particularly small businesses) to offer pension plans like 401Ks and defined-benefit plans. Finally, for workers who find themselves without an employer-sponsored pension plan, the tax relief proposal increases the amount that can be set aside tax-free in an IRA. The increase is from $2,000 per year to $5,000 per year.
Mt. Rainier, Md.: A number of Republicans, John McCain among them, have said they feel this tax bill is unwise the cuts are too large, the tilt is too much toward the rich. Is the party going to tear itself up over a bill the economists are warning against, too? Is this some kind of death wish?
Rep. Rob Portman: I think the more people know about the individual provisions in the tax relief plan, including the retirement security provisions we just discussed, the more support there will be for the concept. Second, I think the more people understand that Social Security and Medicare are protected in a way that's never been done before through the "lock box" there is much more support for tax relief. We have to remember that the non-partisan analysts at the White House and in Congress are telling us the same thing which is that based on their best estimates, there will be $3 trillion of budget surplus over the next 10 years, all of which is created by more taxes coming in than is needed for projected government spending. $2 trillion of that surplus is being set aside in a "lock box," again a major change in the 30-year practice of raiding that trust fund for everyday government spending. $1 trillion is then available as an on-budget surplus. The question becomes: How much of this historic surplus should be spent on Washington programs, and how much of it should be returned to taxpayers who believe they can spend it better for their own needs? Finally, we have to remember that the Republican plan does reduce more public debt than the president's plan, which is something many economists consider important.
Annapolis, Md.: You had a big hand in reforming the IRS. Are you satisfied with the progress the IRS is making in becoming more taxpayer friendly?
Rep. Rob Portman: I am cautiously optimistic that over the next two to five years, we will see the kind of taxpayer-friendly IRS envisioned in the reform and restructuring legislation we passed last year. We are beginning to see some positive changes, but we still have a long way to go. For instance, the 59 new taxpayer rights in that legislation (including shifting the burden of proof to the IRS in tax court) are now taking hold. And the IRS is undergoing a massive restructuring, including changing incentives so that employees will be compensated and promoted not based on how much money they squeeze out of taxpayers, but rather whether they are providing professional, efficient and courteous service to the taxpayers. These changes are going to take a while to implement and the culture at the IRS is going to take a while to transform, but I am cautiously optimistic based on what we've seen since the passage of the reform legislation last year, and with the leadership of the new commissioner, Charles Rozotti
San Diego, Calif.: If various tax credits and other things have expired as of Dec 1998 and June 30, 1999, as the case maybe; isn't it true that we MUST have a tax bill of some kind this year?
Rep. Rob Portman: Yes. It is true that Congress and the president need to extend the provisions of the current tax code, such as the research and development tax credit or the tax preference for employers who pay for employee higher education. This is one reason that I am optimistic about the president and Congress reaching some kind of compromise this year.
Potomac, Md.: Do some portions of the Republican plan go into effect even if the "debt trigger" is not reached? Do the Democratic plans have any kind of debt trigger or will the tax cuts under their bill go into effect regardless of whether the debt is reduced to certain levels?
Rep. Rob Portman: It's my understanding that the president's alternative and the alternatives offered by Democrats on the Hill included no "debt trigger." The Republican "debt trigger" applies to the across-the-board tax relief, which is the largest single part of the tax bill, but it would not apply to the other provisions, in part because this would be difficult to do (for instance, the retirement provisions are phased in, and you want people to plan) and in part because of the impact the "debt trigger" could have on financial markets (for instance, the capital gains tax cut).
El Dorado, Kan.: Congressman Portman:
During the Reagan administration a $1.6 trillion dollar tax cut was floated by the president. In response, House Speaker Tip O'Neal offered what he and fellow Democrats felt was a more "responsible" $1.3 trillion package. How, rhetorically, are you making Americans realize that the current tax cut proposal is peanuts and that the Democrats stand in the way of even greater economic growth?
Rep. Rob Portman: You raise an interesting question about how this tax bill would compare to others that have been proposed. I would make the simple point that in the past 35 years, all tax relief proposals have come out of further deficit spending, not surplus. In other words, what distinguishes this tax relief proposal from all others in the past few decades is that it responsibly only assumes there should be tax relief when there is an "on budget" surplus in the federal budget. We only need to look back two years to 1997, when a net tax cut of roughly $100 billion over five years all of which came out of more deficit pending, not surplus, was supported by not only the vast majority of Republicans and signed into law by President Clinton, but was also supported by about 160 Democrats in the House. Many of those same Democrats have argued against tax relief, even though we now have non-partisan projections of a real surplus of taxpayer funds.
washingtonpost.com: That was our last question today for Rep. Rob Portman (R-Ohio). Thanks to Rep. Portman and to everyone who participated the questions were great. We'll be continuing our discussion of the tax bill and the congressional agenda throughout the August recess. Join us on Tuesday, Aug. 17 at 10 a.m. EDT for a discussion with Rep. Martin Frost (D-Tex.), chairman of the House Democratic Caucus. In addition, Rep. Ben Cardin (D-Md.) will join us on Monday, Aug. 23 at 3 p.m. EDT.
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