Congress turns sights to more modest tax cut; Even scaled-down version threatened by continuing conflict with White House


WASHINGTON -- Drastically scaling back their expectations, House Republicans launched a five-year, $23 billion tax-cut bill yesterday to replace the 10-year, $792 billion tax cut that President Clinton vetoed Thursday.

But even that version faces an uncertain future because it comes in the midst of a battle between the White House and Congress over how to spend the surplus.

The bill approved yesterday, along party lines, by the House Ways and Means Committee would extend some expiring tax credits to avoid what would otherwise amount to a tax increase for some taxpayers.

At least 1 million middle-income families would be hurt by a "time bomb" that would deny them the benefits of the $500-a-child credit, adoption credit, mortgage interest credit, dependent care credit and other credits, said Rep. Bill Archer, the Texas Republican who is chairman of the Ways and Means Committee.

Unless Congress acts, he said, such families might become subject to the Alternative Minimum Tax, which would require them to pay at a 26 percent rate instead of 15 percent. Archer said the effect would be greatest over the next 10 years on taxpayers with incomes between $50,000 and $100,000.

The measure the committee approved would also extend several business tax credits, including the credit for money invested in research and development, which Archer said helps "create jobs for millions of Americans."

Normally, the enactment of a so-called "tax extender" bill is routine. But this year, the measure is ensnared in the conflict between Clinton and Republican leaders over what to do with the estimated $3 trillion budget surplus, including the $2 trillion that belongs to the Social Security trust fund.

The president vetoed the Republicans' $792 billion tax-cut bill, saying it would consume all the non-Social Security surplus, forcing cuts in many other programs, and would do nothing to shore up either Social Security or Medicare.

Treasury Secretary Lawrence Summers told Democrats that he would urge Clinton to veto the "extender" bill, too, because Archer made no provisions for making up the lost tax revenue after the first year. Thus, the money would have to come from the surplus, or would force other spending cuts.

Meanwhile, the "extender" bill is in trouble in the Senate, too.

Sen. William V. Roth Jr., a Delaware Republican who is chairman of the Senate Finance Committee, is angry because Archer did not include in his bill a tax credit for generating fuel from chicken manure, a provision important in Roth's home state as well as in Maryland.

A British company is considering building a plant on the Delmarva Peninsula that could produce electricity from chicken manure. That would help area farmers, barred from selling the manure for fertilizer because it pollutes the Chesapeake Bay.

But the company's representatives say they won't undertake the venture without the tax credit.

Another threat to the extender measure comes from Senate Majority Leader Trent Lott. He says he is afraid to bring even a small tax-cut bill to the full Senate because senators would probably try to add to it their own favorite tax breaks -- causing the entire proposal to collapse of its own weight.

Lott has said he would need a promise that the Senate would restrain itself, something that would be difficult to secure.

Even so, Rep. Benjamin L. Cardin, a Baltimore Democrat, said the "extender" bill was one of three significant tax-related measures with a resonable chance of passage before Congress finishes its work for the year.

The others:

A measure to raise the minimum wage, which could pass only if it included some business tax cuts.

A plan to restore to Medicare some of the cuts to health care providers made in 1997 as part of the Balanced Budget Act.

Cost estimates for the Medicare proposal range up to $20 billion, for which there is no readily available source of revenue other than the Social Security surplus that the Republicans say they won't touch.

Clinton is willing to use the Social Security surplus for Medicare and other purposes once the Social Security program itself is restructured to ensure that it can withstand the drain of the baby-boom generation. The president has proposed his own $250 billion package of tax cuts this year, which he said would not endanger Social Security, Medicare or other programs.

Archer, who is retiring from Congress next year after three decades in office, remains one of the few Republicans eager to work with Clinton on Social Security reform as well as major tax relief. By all accounts, Archer would like to have both as part of his legacy.

Republican leaders have long since given up on a major tax-cut bill -- at least for this year. But Archer told his committee yesterday, "I remain committed to seeking additional tax relief for the American people this year."

"Yes, we have to save Social Security first," he added, "and I hope the president will join with me in convincing our parties that it's in the country's best interest to save Social Security now."

Pub Date: 9/25/99

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