Tax cut revives tobacco bill Senate adopts GOP amendment it nearly killed; Advocates heartened; Senators cautious; House GOP leaders oppose package


WASHINGTON -- The Senate tacked an election-year tax cut onto its sweeping tobacco legislation yesterday, providing a dose of momentum to a bill that has languished for weeks under the weight of a filibuster.

The $46 billion Republican tax amendment, adopted by voice vote last night after opponents narrowly failed to kill it, would grant a $3,300 tax deduction to married couples with taxable income of $50,000 or less. It would also allow all self-employed individuals to deduct from their taxes the full cost of their health insurance.

But huge obstacles remain, including a House Republican leadership that has vowed never to pass a tobacco bill that would raise $516 billion in tobacco taxes over 25 years. Conservatives had sought to offset that tax increase with a tax cut, but it may not be popular enough to win passage in the Senate, much less the House.

"Anybody who declared victory today would be a fool," conceded Senate Democratic leader Tom Daschle of South Dakota. "We've got a lot more hurdles to clear."

Sen. Don Nickles, the Oklahoma Republican leading the opposition to the bill, said: "I would like to say it's going nowhere."

Still, advocates of the original tobacco legislation -- which was intended to reduce teen-age smoking and force the industry to pay for smoking-related health costs -- were heartened by at least a short-term victory.

The tax provision, they say, might serve to revive the tobacco legislation, which has been limping for weeks -- even though those who backed the tax measure included some opponents of the tobacco bill itself.

"People wanted a tax cut in the bill," Sen. John McCain, an Arizona Republican who wrote the tobacco legislation, said wearily last night. "But more importantly, they wanted to move the process forward."

With House and Senate Republicans at loggerheads over the 1999 budget, the far-reaching tobacco bill may be the only vehicle available to provide an election-year tax cut.

The White House appeared to be encouraged by the agreement in the Senate. President Clinton's spokesman, Mike McCurry, said of the Republicans: "They have gone from an appetite for a much more expansive approach on tax cuts now to what is, in effect, a fairly targeted approach to middle-income tax relief."

A bill that once seemed unstoppable, however, still faces sharp disagreements over issues such as its treatment of tobacco farmers.

Opponents vow delay

Opponents, such as Sen. John Ashcroft, a Missouri Republican, are still promising to delay a final vote by proposing an endless stream of amendments. Today, conservatives will try again to limit the fees of lawyers who are suing the tobacco industry.

And House Speaker Newt Gingrich solemnly vowed yesterday that the House would never accept a bill that resembles the Senate measure, which would raise $516 billion over 25 years. A coalition of House conservatives said yesterday that they would fight any tobacco bill that raised taxes, declaring the Senate version "dead on arrival."

Still, the tobacco bill is slowly shaping up as the catch-all legislation of 1998. It could raise the price of cigarettes by $1.10 a pack, slap sharp curbs on tobacco marketing and advertising, pay for medical research, cut taxes and finance drug interdiction and anti-drug education. It could even provide young victims of schoolyard violence with federally funded vouchers to attend private school.

Conservative Senate Republicans had floated many of their proposals as "poison pills," hoping their passage would turn Democrats against the tobacco bill and force its defeat. The voucher provision, tucked into an anti-drug measure narrowly approved Tuesday night, was thought to be anathema to Democrats.

But the tobacco bill's supporters have grudgingly accepted those measures, figuring that any final legislation will be negotiated behind closed doors among Clinton and Republican and Democratic leaders of Congress. Whatever passes the Senate might look nothing like the final bill.

Getting a bill out

"We all understand this bill will finally be written in conference" with the House and the president, said Sen. Kent Conrad, a North Dakota Democrat. "The critical point is to get a bill out of the Senate."

Indeed, the legislation as it stands may be impossible to enact.

Over the first five years, tobacco taxes would provide $26 billion to state governments, $15 billion to combat illegal drugs, $16 billion for tax cuts, $3 billion for veterans with smoking-related illnesses, $18 billion for tobacco farmers and farming communities, $14 billion for anti-smoking campaigns and smoking cessation programs and $14 billion for health research, for a total of $106 billion.

But the fees and penalties on the tobacco industry are supposed to raise only $65 billion over that time.

Once fully phased in after 10 years, the tax cut to end the so-called marriage penalty would cost $13 billion a year -- nearly all the $15 billion to $16 billion expected to be raised by the $1.10-per-pack cigarette tax.

Provision added

"Obviously, the traffic can't bear that," said Sen. John H. Chafee, a moderate Republican from Rhode Island.

Under pressure from those like Chafee who said the tax cut would consume too much of the tobacco revenue, Sen. Phil Gramm, the Texas Republican who drafted the marriage tax cut, tried to answer critics. Just before the vote, Gramm added a provision stipulating that no more than 30 percent of tobacco revenue would pay for the tax cut. If the cost exceeded that amount, the difference would come out of the overall federal budget.

But that provision led Democrats to complain that the tax cut could come partly from budget surpluses they hoped to dedicate to shoring up the Social Security system. That suspicion nearly defeated the tax measure. Five Republicans voted against the tax-cut amendment.

"This shouldn't be a tax-cut bill," Chafee said. "This money should be used to prevent people from smoking."

The bill's fate lies with the House. Republican House leaders say they plan to draft a narrow bill to combat teen-age smoking and drug use, but they have refused to raise the price of tobacco.

"Our commitment is to do anything it takes to block this bill," said Rep. David M. McIntosh of Indiana, standing before seven other House conservatives. "You ought to consider it dead on arrival."

Rep. Deborah Pryce of Ohio, who heads the Republican task force on tobacco, said the scope of a House bill would depend on the bill's momentum as it emerges from the Senate. That bodes poorly for a bill that is dragging through its third week of debate.

"The House will take action," she promised, "but it is very instructive to see the trials and tribulations of the Senate activity."

Pub Date: 6/11/98

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