House GOP leaders yesterday abruptly switched direction on taxes, abandoning their press for an immediate massive tax cut in favor of swift action on a far more modest package that would include popular provisions such as marriage penalty relief and educational tax breaks.
President Clinton and the Republicans clashed over taxes last year, culminating in Clinton's veto of the $792 billion GOP tax cut package. Republicans say that rather than engaging in a reprise of last year's futile effort and opening themselves up to election year criticism for accomplishing nothing, they want to strike early--before the presidential campaign gets into high gear--to pass a small, targeted tax package designed to appeal to voters.
"We tried the big bill," said House Majority Whip Tom DeLay (R-Tex.). "It didn't work."
This time House Speaker J. Dennis Hastert (R-Ill.) and other top leaders are promoting a tax package less than one-seventh the size of last year's measure and even smaller than the across-the-board tax cut being proposed by GOP presidential front-runner George W. Bush.
Their pragmatic political calculation appears to be that Clinton would have little choice but to sign such a bill, and that the GOP--in a tough battle to retain control of the House--would reap the political rewards.
By focusing on a small handful of popular measures, including reducing the tax liability of the 44 million married people who file jointly, such a plan will be far easier to promote than a cornucopia of tax breaks, said John Feehery, a spokesman for Hastert. The new GOP plan would also feature tax breaks to help families save money for college and other educational expenses.
"Our tax package last year had many good things in it, but we couldn't effectively communicate it because of [the controversy over] the price tag," Feehery said.
Last year's far-ranging GOP tax bill included cuts in all the income tax rates, elimination of the estate tax, health care and retirement provisions, a reduction in individuals' capital gains rates, tax breaks for overseas corporations and scores of other provisions that will not be included in this year's bill.
The White House last night refused to commit to the proposal, saying that Clinton is interested in considering targeted tax cuts in the context of a larger agreement. "We'd like them to work with us on a comprehensive plan that locks in fiscal discipline, has Medicare and Social Security reform and targeted tax cuts," said Gene Sperling, the president's chief economic adviser.
The more modest tax legislation is part of a larger GOP agenda for the coming year that includes accelerating the effort to pay down the $3.6 trillion publicly held debt and passing new trade legislation and measures to promote new technology and Internet ventures.
House Majority Leader Richard K. Armey (R-Tex.) said that promoting free trade and the nation's high-tech industry is crucial to sustaining America's economic boom.
House Republican Policy Committee Chairman Christopher Cox (Calif.) outlined several high-tech measures the leadership hopes to pass this year, including those opposing "predatory, discriminatory or multiple" taxes on the Internet and promoting the export of encryption technology.
The emerging GOP tax package, including community redevelopment incentives that have been jointly promoted by Hastert and Clinton, would cost roughly $120 billion over 10 years, according to House Ways and Means Committee estimates. By contrast, Bush's highly touted tax package would cost $483 billion over five years and an estimated $1.1 trillion over the coming decade.
The Texas governor's proposed tax measure is similar in some ways to the Republican plan of a year ago, although it does not include a reduction in the capital gains tax, a measure strongly favored by congressional Republicans but not included in yesterday's proposal.
Robert D. Reischauer, a budget analyst and former director of the Congressional Budget Office, said congressional Republicans appear to be trying to "keep their powder dry" until the presidential primary season ends.
"They would face some significant tactical difficulties if they were to push forward with a large tax cut plan, many elements of which would not conform with the proposal that George Bush is running on," Reischauer said.
During a news conference yesterday, Hastert did not rule out the possibility of additional tax legislation later this year, after the GOP presidential race is settled and congressional leaders have time to confer with the nominee.
However, Republican aides stressed that the leadership is more concerned about racking up some impressive political accomplishments early in a critical election year than waiting to receive marching orders from the Republican presidential nominee.
"The leadership is trying to limit the excuses available to the president for vetoing tax relief," said Trent Duffy, a spokesman for House Ways and Means Committee Chairman Bill Archer (R-Tex.), who will draft the tax legislation.
GOP aides and White House officials have already begun talks on how to reconcile their competing proposals on aid to poor urban and rural areas, and Hastert said he is confident the two sides can broker a compromise before the bill comes to the floor for a vote. The Republican measure emphasizes tax credits to spur development while the White House plan focuses more on government lending.
"This is something we can come together on final agreement and pass good legislation," Hastert said.