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Archer Warns President on Corporate Welfare

Monday, January 27, 1997

OnLine

Tax increases, including the elimination of certain "corporate welfare" provisions, should not be part of President Clinton’s fiscal 1998 budget proposal, House Ways and Means Committee Chairman Bill Archer, R-Texas, said in an article published Sunday in the Washington Post.

Archer congratulated the President for proposing a balanced budget with tax relief provisions, but cautioned that "if the President’s budget, under the guise of eliminating so-called ‘corporate welfare.’ proposes raising taxes on job makers, risk takers and investors as his way of balancing the budget, I will have no choice but to protect the taxpayers from tax-hiking extremes."

Archer did not name specific provisions to which he would object, but his remarks seemed to refer to several proposals in Clinton’s fiscal 1997 budget that targeted Wall Street financial transactions for elimination. The chairman did make clear he is not opposed to eliminating or reforming "inappropriate, and anachronistic provisions in the tax code, including the closure of unintended loopholes."

Archer’s article was published just two days before House Budget Committee Chairman John Kasich, R-Ohio, is scheduled to release a list of "corporate welfare" provisions he believes should be eliminated as part of the budget. Kasich, according to congressional aides, has decided not to include tax loophole closers as part of his list because some of the more conservative members of the coalition, including Americans for Tax Reform, who are helping him develop the list, think closing tax loopholes should be addressed as part off a larger effort to reform the tax code.

During the last Congress, Kasich and Archer were at odds over Kasich’s proposal to eliminate several corporate tax provisions.

"We are very encouraged by the seriousness with which people are debating the President’s ideas," White House Press Secretary Mike McCurry said Monday when asked about the Archer article. "My guess is that [Archer] will find some aspects of the budget wanting," McCurry added.

In the article, the Texas congressman congratulated the President for proposing capital gains tax relief for homeowners, but said the Clinton plan does not go far enough. Clinton’s plan would allow joint filers to sell their residence and exclude up to $500,000 ($250,000 for single taxpayers) from capital gain taxation. "Republicans and many Democrats believe capital gains relief should include other investment, not just residential real estate."

Senate Finance Committee Members Put Their Stamp on Capital Gains Tax Cut: Indicating a desire to forge a compromise on major tax legislation, a bipartisan group of Senate Finance Committee members last week introduced capital gains rate reduction legislation that borrows elements from both the Republican and Democratic leadership tax proposals. More details of the proposal were made available Monday.

The proposal does not contain the provision in the GOP leadership bill to allow indexing of capital assets for inflation. "We left the indexing proposal out to make it easier to pass," a Senate GOP aide told .

Sen. Orrin Hatch, R-Utah, was joined in introducing the bill by fellow Senate Finance Committee members John Breaux, D-La., and Charles Grassley, R-Iowa, together with Sen. Joseph Lieberman, D-Conn.

The bill is similar to capital gains legislation (S. 2) introduced Jan. 21 by Senate Majority Leader Trent Lott, R-Miss. Both bills would allow individual taxpayers to deduct 50% of net capital gains, meaning the top capital gains rate would become 19.8%, down from the current law 28% top rate. The Hatch bill also contains a provision in the Senate Democratic tax package (S.20) to allow investors who hold stock in a small business to defer the gain on that stock if the proceeds are reinvested in another small business.

Educational Assistance Bill Would Allow for Graduate Course Exclusion: Legislation introduced Jan. 21 by Sen. Daniel Moynihan, D-N.Y., would permanently extend the employer-provided educational assistance tax exclusion, and retroactively repeal the elimination of the exclusion for graduate courses. The exclusion is set to expire in June.

"Our most recent extension of section 127 last year excluded expenses of pursuing graduate level education for courses beginning after June 30, 1996. This was a serious mistake," Moynihan said in a statement on the Senate floor.

Twenty-five senators joined Moynihan in sponsoring the bill (S.127), including Senate Finance Committee Chairman William Roth, R-Del. Other Finance Committee sponsors include Sens. Richard Bryan, D-Nev.; John Chafee, R-R.I.; Alfonse D’Amato, R-N.Y.; Charles Grassley, R-Iowa; Orrin Hatch, R-Utah; Carol Moseley-Braun, D-Ill.; and Jay Rockefeller, D-W.V.