|  Home   |  Site Search   |  Tax News & Views  |

Archer Says Budget Talks Should Not Start Until Details on Tax Proposals Available

Tuesday, February 25, 1997

Deloitte & Touche OnLine

House Ways and Means Committee Chairman Bill Archer, R-Texas, and Senate Finance Committee Chairman Bill Roth, R-Del., wrote Treasury Secretary Robert Rubin asking for statutory language on the tax-cut trigger proposal, which would reduce the proposed tax cuts if it is determined that the federal budget deficit is not declining.

"If the specific statutory language for the application of the tax cut sunset is not made available, the Administration will hinder the Joint Committee’s mandate to analyze revenue consequences of the President’s budget proposal," the letter said.

Archer, speaking at a conference sponsored by the Tax Foundation and the law firm of Baker & Hostetler, also expressed concern about the administration’s proposal to replace the export sales source rule with an activity-based rule. The proposal has garnered opposition from members of the House Ways and Means Committee and the Senate Finance Committee.

No deal until summer

An administration official predicted that an agreement on the budget will not be reached until the summer, but also urged congressional leaders to meet with administration officials soon to move the process forward.

The President would resist efforts to separate a tax-cut bill from the budget deficit reduction bill, as some GOP lawmakers are suggesting, White House Legislative Affairs Director John Hilley said at the conference.

Even if the tax-cut bill were offset by other policy changes and, if the cut did not affect the budget deficit, the President would object to passing a tax cut in a separate legislative vehicle from the budget deficit reduction package, he said.

Hilley warned that the GOP proposals to cut capital gains taxes and expand Individual Retirement Accounts would cause a "fiscal hemorrhage" in the budget and increase the deficit.

The President’s proposed capital gains tax-cut proposal, which is targeted at homeowners, is the most effective way to grant relief, Hilley said. Another approach that would provide targeted relief is the provision suggested by Senate Democrats in 1995 that granted capital gains relief to small business owners, he said.

Vote On Aviation Tax Postponed: Rep. Van Hilleary, R-Tenn., objected to the bill, H.R. 668, which temporarily would extend the airline ticket tax and other aviation-related excise taxes, thus forcing the House to vote on the measure tomorrow.

Hilleary’s objection under the House procedure known as "suspension of the rules" means two-thirds of the House must vote in favor of the measure for it to pass.

Hilleary objected to the $2.7 billion measure on the grounds that it is a tax hike that should be offset by a temporary reduction in the gasoline excise tax.

Estate Tax Harms Farmers: The current estate tax system is harmful to the U.S. economy in general and to family farmers in particular, Senate Agriculture Committee members and witnesses said at a hearing Tuesday.

"It is my view that the estate tax discourages savings and investment, stifles growth and robs us of potential new jobs," Committee Chairman Richard Lugar, R-Ind., said at the hearing. "Some experts argue that more income tax revenue is lost through the maneuvers of estate planning than is ultimately gained by the inheritance tax," he added.

Testifying before the committee, Sen. Byron Dorgan, D-N.D., said the estate tax should not apply to farm transfers from one generation of a family to the next. "I think that we must take immediate steps to breathe new economic life and opportunities into our family businesses and the communities in which they operate," Dorgan said.

Taxpayer Advocate Reports: House Ways and Means Oversight Subcommittee Chair Nancy Johnson, R-Conn., Tuesday expressed disappointment in the lack of specific recommendations offered in the Internal Revenue Service taxpayer advocate’s report presented to Congress.

In the first of two annual reports submitted to Congress, Taxpayer Advocate Lee Monks emphasized problems associated with the level of complexity taxpayers face and also expressed a need for greater access to toll-free customer telephone service.

Congress needs precise recommendations on portions of the tax code and the Taxpayers Bill of Rights 2 Act that may harm a taxpayer when dealing with IRS, Johnson said. Monks is "missing the point," if he did not have specific recommendations, she added.

Monks expressed his hopes that the next report to Congress in July would "provide more of what (the subcommittee) is looking for." He did concede that this report "is only the tip of the iceberg" and that "we (the Taxpayer Advocate’s office) have not made the type of progress we would have liked."