Budget deal sails past Congress President is expected to sign bills into law sometime next week; Legislators to begin recess; Sarbanes opposes tax cut; Senate enacts 2 major budget bills

THE BALTIMORE SUN

WASHINGTON -- With unusual speed and boisterous good humor, Congress yesterday overwhelmingly approved bills designed to balance the budget for the first time since 1969 and granting the first broad federal tax cut in 16 years.

President Clinton, who plans to sign the bills into law next week, hailed enactment of his pact with Republican congressional leaders as "the achievement of a generation and a triumph for every American."

The tax cut measure, which promises $94 billion in net reductions over five years, roared through both houses of Congress yesterday, drawing huge bipartisan majorities for a cornucopia of new breaks for families, students and investors.

Earlier yesterday, the Senate gave its blessing to a spending bill approved Wednesday by the House that represents the other half of the legislative package that promises to eliminate the federal deficit within five years.

The bill trims the growth of federal spending by $270 billion over five years, with much of the savings coming from Medicare and Medicaid. But it also creates a health care program for uninsured children.

Acting out the final scene in the long-running congressional budget drama, the Senate voted 92 to 8 last night to approve the massive tax measure, which includes reductions in capital gains and estate taxes, as well as tuition tax breaks and $500 per child credits for most families in America.

"This is what the American dream is all about," exclaimed Senate Majority Leader Trent Lott of Mississippi as the final roll call began. "Everybody can declare victory with this bill."

House Speaker Newt Gingrich, who once called tax cuts the "crown jewel" of his 1994 "Contract with America," crossed the Capitol to watch the senators act. His House troops voted a few hours earlier to approve the tax cuts by a tally of 389 to 43.

"We can all revel for what we are about to do for the American people," said Rep. Bill Archer, a Texas Republican who chairs the House Ways and Means committee. "This [tax] plan and a balanced budget are what the American people sent us here to do -- and we have delivered."

Maryland Sen. Paul S. Sarbanes was among a handful of opponents -- all Democrats -- of the tax package, arguing that the cuts will take such a huge bite out of federal revenues over the next decade that they will throw the budget out of balance again.

"Is is not imprudent, indeed irresponsible, to commit to these cuts before we have achieved a balanced budget?" Sarbanes asked his colleagues.

Maryland Sen. Barbara A. Mikulski voted for the bill. The Democrat had praised the measure for providing tax breaks to "Main Street as well as Wall Street."

Vice President Al Gore presided over the balloting for the spending bill, but his help wasn't needed to pass the measure, which was opposed by only three Democrats and 12 Republicans.

Mikulski and Sarbanes voted for the spending bill. Both had opposed an earlier version because it included cuts in Medicare benefits that have since been dropped.

Opposition to the tax bill in the House as well as the Senate was limited mostly to a band of liberal Democrats, who complained that too much relief was going to the rich, while little or nothing was going to the poor.

"I cannot justify voting for a bill that gives the largest tax breaks to the richest Americans while our middle- and lower-income taxpayers continue to bear the burden," said Rep. Elijah E. Cummings, whose West Baltimore district is among the poorest in the country.

All seven other House members from Maryland voted in favor of the tax-cut measure.

Most Democrats adopted the attitude of Rep. Charles B. Rangel of New York, who said he agreed with Clinton that it was time for compromise after 2 1/2 years of fighting with the Republican-led Congress. "The president of the United States has spoken and the American people support him," Rangel said. "They want a tax cut, they want an end to the fighting, they want bipartisanship."

Lawmakers on both sides of the aisle looked ahead to a month-long recess beginning today when they can go home and brag about overcoming Washington's legendary gridlock.

Republicans wallowed in their delight at finally being able to make good on long-cherished goals of cutting taxes for families and investors.

The tax bill provides tax credits for children under 17 of $400 each next year, and $500 each year thereafter. Families with incomes of up to $75,000 for single parents and $110,000 for couples would be eligible. In cases where families earn too little to pay income tax, the child credit could be applied to their payroll taxes for Social Security and Medicare.

Owners of small businesses and family farms are expected to benefit from an exemption on estate taxes that will rise to $1.3 million from the current $600,000.

Homeowners selling a principal residence will get capital gains exemptions of $250,000 for single filers and $500,000 for couples.

For other investors, the bill drops the top rate of the capital gains tax from 28 percent to 20 percent. New tax incentives are offered to stow money away in retirement savings accounts.

The tax cuts will be partly offset by a $51 billion increase in airline taxes that will result in an extra charge to passengers of $3 for each leg of a flight. The 24-cent per pack federal tax on

cigarettes is also set to rise gradually by an additional 15 cents per pack.

Democrats crowed about Clinton's success in winning tax breaks to help students attend college, as well as new relief for the working poor.

The tax bill includes Clinton's Hope Scholarship program -- a $1,500 per year tax credit available for the first two years of college, and a $1,000 credit for the third and fourth years. The credits are available for singles with incomes up to $50,000 and couples who earn up to $100,000.

The bill creates education IRAs that will allow parents to contribute up to $500 a year. Earnings would be tax-free if withdrawals are made for higher education expenses.

"The rich still get richer, but this is a good bill that my constituents in Maryland can use," said Rep. Albert R. Wynn, the Prince George's County Democrat. "This isn't going to solve all the problems, but it points in the right direction."

Pub Date: 8/01/97

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