Promised Tax Cuts Starting To Fizzle Out Big Reductions ‘Really Being Oversold Right Now,’ Congressman Says
That big tax cut being promised by Washington may not be all it’s cracked up to be.
When White House officials and Republican congressional leaders announced a grand budget compromise last week, they said it would include new tax credits for families with children, cuts in the taxes on capital gains and on family estates, new incentives to save for retirement and big breaks for college expenses.
But now that the initial euphoria has begun to wane, it is becoming clear that enacting that wish list in full would take far more than the $135 billion allotted for tax cuts in the budget agreement.
To make matters worse, House Ways and Means Committee Chairman Bill Archer, R-Texas, says that to reach the goal of a balanced budget by 2002, Congress may not even be able to afford the full $135 billion tax-cut goal.
Lawmakers already are trying to figure out how to squeeze, target, postpone or drop some elements of the tax package to bring the cost into line.
That has set off a mad scramble of competing political interests - and not just Republicans against Democrats. The limited tax-cut pot also is pitting elements of the GOP political base small businesses, religious activists, big businesses and farmers - against one another.
When the dust settles, there may be some disappointed taxpayers. Families may have to wait a while before they get the $500 tax credit per child that Republicans have been promising; investors may not get as steep a rate drop in capital gains taxes as some had hoped; GOP talk of abolishing the estate tax surely will give way to more modest changes.
“Clearly, the tax reduction on each item will not be able to be in there in the way a lot of people would like if their dreams could come true,” Archer said in an interview. “We’ll do as much as we can.”
“This thing is really being oversold right now,” said Rep. Robert T. Matsui, D-Calif. “People are going to be disappointed.”
White House and GOP negotiators still are haggling over key details of the overall budget agreement, which calls for trimming the growth of Medicare by $115 billion over five years, plus undertaking other deficit-reduction initiatives. On the tax front, the proposed $135 billion in cuts over five years is to be offset partially by $50 billion in tax increases, for a net cut of $85 billion.
Archer said, however, that Congress may have to settle for a gross tax cut of less than $135 billion because it will be hard to fully achieve $50 billion in tax increases. “I don’t see any way we’re going to get” to those figures, he said.
Although the budget agreement does not spell out the details, negotiators said they intended to include five key elements: tax credits for families with children; cuts in capital gains taxes, which apply to the sale of real estate, stock and other assets; reduction in the estate tax, which now hits inheritances in excess of $600,000; expansion of Individual Retirement Accounts, to which certain groups of people can make tax-deductible contributions; and some version of President Clinton’s proposals to provide tax breaks for college expenses.
On Thursday, White House and Republican officials were at odds over terms of the education compromise.
Democrats claim that GOP negotiators made a specific commitment to include $35 billion over five years for Clinton’s tax breaks; Republicans deny it. Some say they stipulated no specific figure; others say they committed to $35 billion spread over 10 years.
That dispute aside, the other tax-cut proposals endorsed in the budget agreement would cost more than $135 billion if fully embraced. According to an analysis by the Joint Committee on Taxation, the other four proposals would cost some $193 billion over five years if they were enacted in the form proposed by Senate GOP leaders earlier this year.
In piecing together the tax bill, lawmakers and lobbyists say, Congress is not likely to drop entirely any of the highlighted items but is likely instead to find ways to cut the cost of each.
xxxx UNRESOLVED QUESTIONS Clinton’s proposed tax credits and deductions for college students, costing $35 billion over five years. The year-to-year flow of the tax package. The Consumer Price Index. Medicare. Other issues. There is no agreement on what the year-to-year deficits will be. And disputes remain over precisely how much would be spent for domestic programs next year and for defense.