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Rubin Wants to Work With Congress to Make Tax Proposal Fairer to Average Families

Tuesday, June 10, 1997

The Clinton Administration objected to the proposal unveiled by House Ways and Means Committee Chairman Bill Archer, R-Texas, June 9 on the grounds that it is unfair to average American families.

"Our basic objective is to have a tax plan that is good for the American people, good for working people, good for average families, good for the economy and is permeated with fairness throughout. By that test, we have serious concerns with significant parts of the chairman’s tax plan," Treasury Secretary Robert Rubin said.

Despite the concerns, "we look forward to working with Congress and ultimately winding up with a tax bill that meets the test I mentioned a moment ago," Rubin said.

Troubled by indexing

Although the administration accepts that capital gains tax cuts are coming, Rubin added that the indexing component is the most troubling part of the proposal.

"On cap gains, they lowered the top rate to 20 percent and they also have indexing so they are really providing a double benefit to people with capital gains," Rubin said. Indexing also would blow a huge hole in the deficit in future years and would be complex to administer, Rubin added.

"We have never been in favor of a broad-based capital gains tax cut. On the other hand, we’ve always said that it’s likely because Republicans do favor it," Rubin said.

A 10 percent capital gains tax rate for individuals in the 15 percent income tax bracket and a 20 percent capital gains tax rate for individuals in the 28 percent and higher income tax brackets were proposed by Archer. A 30 percent capital gains tax rate for corporations would apply if assets are held more than five years, in Archer’s plan.

The underlying basis of capital assets would be indexed for inflation starting in 2001 and would apply to assets held for more than three years.

Other objections

The administration questioned changes Archer proposed to Clinton’s Hope scholarship plan. Under the Archer plan, students could receive a tax credit for half their college tuition costs, up to $3,000.

Rubin objected to Archer’s proposal on the grounds that it would not provide as much relief to people attending lower cost colleges. Clinton’s proposal would provide a credit of up to $1,500.

Another proposal Rubin opposed is the structure of the child credit and how it relates to the earned income tax credit and the dependent care credit. The child credit is less generous than it appears because families who qualify for the earned income credit will not receive the full benefit of the child credit and because for those who claim the dependent care credit, the child credit will be reduced by 50 cents for every dollar they receive of dependent credit after the first year.

"That is a very serious issue," Rubin added.

Other Democrats object

Archer’s tax plan is unacceptable to Ways and Means Committee Democrats, who object to the plan saying it does a lot for the richest Americans and does little for the poorest ones.

Reps. William Jefferson, D-La.; Sander Levin, D-Mich.; Robert Matsui, D-Calif..; and Charles Rangel, D-N.Y., who are on the committee, all oppose the plan.

Rangel plans to offer a more progressive Democratic alternative to Archer’s plan when the committee debates the bill June eleventh.