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Archer Will Not Accept Senate Language on Tax Bill

Wednesday, July 17, 1996

OnLine

House Ways and Means Committee Chairman Bill Archer, R-Texas, Wednesday rejected the suggestion offered by some Senators that the House accept the Senate’s version of the small business tax bill (HR 3448) in order to side-step the impasse that has prevented the measure from moving forward in the Senate.

"They made significant changes and we need to go to conference," Archer said according to CongressDaily news service. The House passed the bill May 22 and the Senate July 9.

The Senate’s version of the tax bill is larger than the House’s version, mainly because the Senate chose to extend various expired tax provisions on which the House did not act. Both versions, however, phase out the possessions tax credit (a tax break for U.S. companies that set up manufacturing facilities in U.S.-owned possessions, such as Puerto Rico) and increase expensing limitations for small businesses (from $17,500 to $25,000), as well as increase the minimum wage.

Senate Majority Leader Trent Lott, R-Miss., indicated he would attempt to appoint conferees on the small business tax bill and on the health insurance reform bill (S. 1028) this week.

Prior attempts to name Senate conferees failed due to opposition from Sen. Ted Kennedy, D-Mass., over medical spending accounts in the health reform bill and from Sen. Don Nickles, R-Okla., over the minimum wage provision in the small business tax bill.

Expect Dole Economic Plan Before August: Probable GOP presidential candidate Bob Dole promised to unveil his 10-point economic program before August and indicated that it would include some form of tax cut.

"A tax cut will be part of it," Dole said on CNN’s Larry King Live about his soon-to-be released economic program.

When asked about tax reform, Dole said he supports a "flatter, fairer, and simpler" tax code. The first priority should be to enact the 10-point plan "and then we go into a more major overhaul after the first year or two," he said.

House Approves IRS Funding Cut: A spending bill that would give the IRS $6.6 billion in 1997, $774 million less than 1996, passed the House Wednesday despite objections by Treasury officials and the House Ways and Means Committee.

The officials have warned that the cuts are too severe and that basic IRS functions would be jeopardized. The IRS would not adequately be able to collect taxes, process 1997 tax returns in a timely manner, or improve customer service, several Ways and Means members said.

Under the bill, which passed 215-207, tax systems modernization would receive $424.5 million in fiscal year 1997, a drop of $270.5 million from the 1996 level. In addition, the bill would fence off all TSM funds until the IRS establishes an agreement with the private sector to develop and deliver an effective TSM program.

On the House floor Wednesday, Rep. Steny Hoyer, D-Md., ranking Democrat on the House Appropriations Treasury Subcommittee, complained about the legislation to Rep. Jim Lightfoot, R-Iowa, the subcommittee chairman.

Lightfoot assured Hoyer he wanted TSM to succeed. He also defended a bill provision that would transfer TSM procurement activities to the Department of Defense.

"On one point I will not negotiate -- the IRS is out of the business of TSM contracting," Lightfoot said, adding he is willing to negotiate with Treasury over who will be responsible for TSM contracting.

Senators Oppose Utility Provision In Tax Bill: A provision in the small business tax incentive bill that opponents say would increase utility rates unfairly and would have dire economic consequences for certain states came under fire on the Senate floor last week.

"Understand, the Treasury will pick up $80 million ... over a 10-year period of time, but it will wind up costing New York ratepayers," Sen. Alfonse D’Amato, R-N.Y., said on the Senate floor July 10.

Warning that he would oppose the appointment of conferees on the bill unless the provision is dropped, D’Amato said, "We are not going to stand still for this."

Under the revenue-raising provision, entities that use private-activity tax-exempt bonds to furnish electricity or natural gas may discontinue their qualification for tax-exempt status and then expand their service areas, which had to be restricted in order to obtain exempt financing under current law.

The Senate Finance Committee in its report on the bill explained that the law should be changed to foster competition by allowing utilities to expand their area of service and by eliminating the tax-exempt financing subsidy.

Joining D’Amato on the Senate floor to oppose the provision were Sen. Daniel Patrick Moynihan, D-N.Y., and Sen. Harry Reid, D-Nev.

Tax Relief For Washington Faces Opposition: Efforts to revive the District of Columbia by replacing the current federal tax system for the jurisdiction with a 15% flat tax have run into strong opposition, White House Press Secretary Mike McCurry said.

The primary opposition comes from House Ways and Means Committee Chairman Bill Archer, R-Texas, who said the measure most likely would not pass his committee. The Ways and Means Committee has jurisdiction over all tax issues that come before the House.

Underlying the opposition to the proposal is the concern about regional equity in the tax code. Though the fiscal decline of Washington is great, how would voters react if Congress gave Washington, D.C., a tax break but did not do the same for the rest of the nation, observers asked.

House Speaker Newt Gingrich, R-Ga., earlier supported the measure, which would eliminate the capital gains tax for investments made in the city, and would leave intact the mortgage interest and charitable gift donation deductions.

"We’re interested in helping the District, but there may be other ways" than the tax proposal, McCurry added.

Deficit Declining, Administration Report Shows: The Clinton administration issued its midsummer budget deficit snapshot predicting that the government would be $116.8 billion in the red in fiscal 1996.

The projected deficit is about $29 billion less than the $146 billion projection released in the spring, according to the Office of Management and Budget’s Mid-Session Review of the 1997 Budget.

The report attributes the lowered projection to two factors: a stronger economy and federal belt tightening. Federal spending will be about $2 billion lower than the administration projected in March.

At the same time, "the economy has performed better than expected," generating about $27 billion more in revenues than anticipated earlier in the year, the report said. "The fact is, our economy is now the soundest in a generation," President Clinton told the National Governors’ Association.

Meanwhile, congressional Republicans questioned whether Clinton deserves credit for the lowered federal deficit. "The administration taking credit for [the decline] is like the rooster taking credit for the sunrise," Senate Budget Committee Pete Domenici, R-N.M. said.

When claiming Clinton does not deserve credit for reducing the deficit, Domenici and other congressional Republicans are articulating their belief that Democrats are tax-and-spend liberals, who would bankrupt the government if they were not checked by fiscally responsible Republicans.