Clinton Not Ruling Out
Tax Cut Next Year

Friday, December 5, 1997

OnLine

President Clinton is not ruling out the possibility that tax cuts could be part of next year’s budget, but warned that cuts are possible only if the anticipated budget surplus materializes, according to an interview with The New York Times.

"I wouldn’t rule out the fact that I might find something that I think would work, but I don’t have an idea on the griddle" right now for a tax cut, Clinton told the Times. Any tax cut would have to be fair for average taxpayers, good for the economy, and lead to a simpler overall tax system, Clinton added.

A surplus may occur because the economy is outperforming expectations, and many budget analysts now predict the budget deficit for fiscal 1998 will be even lower than current estimates. Nevertheless, Clinton cautioned, "I think we need to be somewhat careful before we just go spend all this money that hasn’t materialized."

The President may be hinting that he might consider including a tax cut in his fiscal 1999 budget proposal, which he will submit to Congress early February, because he wants to be out in front on the tax-cut issue.

Clinton may want credit for any tax cut and to avoid any negative media coverage, particularly after the treatment he received over the Internal Revenue Service restructuring effort. Only after GOP legislators took steps to enact legislation did Clinton fully support the measure and, as a result of his lackadaisical timing, he was criticized for being a follower, not a leader.

GOP Tax-Cut Plans

Congressional Republicans also have been calling for tax cuts next year, if the budget allows. Rep. Kenny Hulshof, R-Mo., is heading the GOP freshman effort to develop a tax-cut plan, and he is looking at creating a tax exclusion for interest and dividend income among other proposals, sources said.

House Ways and Means Committee Chairman Bill Archer, R-Texas, earlier asked the Joint Committee on Taxation staff to study ways to eliminate the marriage penalty, the limit on itemized deductions, and the phaseout of the personal exemption.

A list of possible tax cuts from Senate Finance Committee Chairman William Roth, R-Del., is headed by an across-the-board tax cut, which may prove to be too expensive, he acknowledges. Other items on his list include expanding tax-favored education benefits or individual retirement accounts, eliminating the marriage penalty, and increasing the exemption for the alternative minimum tax to ensure middle-class families are not subject to it.

Others express different views

Support for using the surplus to cut taxes will not be unanimous. House Budget Committee Chairman John Kasich, R-Ohio, and other deficit hawks argue that any surplus should be used to reduce the deficit. Others still, such as House Transportation Committee Chairman Bud Shuster, R-Pa., say that any surplus should be used to improve the nation’s transportation system.

The factions within the Republican ranks may force GOP leaders to cooperate to a greater extent with congressional Democrats in writing a tax-cut bill. Considering the slim majorities that Republicans hold in the House and Senate, they may need some Democratic support to pass a tax cut, if there is no unanimity among the GOP.

Tax reform ideas weak

The President also finds none of the tax reform ideas currently under discussion -- a national sales tax or flat tax -- exciting, according to the interview.

Clinton met with Archer, who supports a national sales tax, about tax reform, but said none of the proposals now being circulated met his criteria for revamping the system. Any new system must be fair and simple, good for the economy, and politically realistic, he said. A national sales tax and a flat tax would be simple, but would not meet the other criteria, administration officials have said.

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