To help pay for his tax package, which includes more than 200 discrete tax provisions, Archer has included about half of the tax increases proposed by the President in his budget, including taxation of certain spin-off transactions (Morris Trusts), restricting short-against-the-box transactions, and reducing the carryback period for net operating losses. Archer has added substantial new revenue-raising provisions, including a proposal to tax commercial activities of Indian tribes and a further disallowance of interest associated with corporate-owned life insurance. All his revenue-raising provisions amount to $47 billion over five years and $109 billion over 10 years.

Archer’s tax proposal promises a giant reduction in taxes on savings and investment. It does so in a way that also promises to increase pressure on federal spending after the turn of the century. In the near term (through 2002), most of the proposal’s tax cut comes from a $500 per child tax credit for middle-income families and modifications of education incentives sought by the President. The child credit is less generous than it appears in that many families who qualify for the earned income tax 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 $0.50 for every dollar they receive of the dependent credit after the first five years.

Together, the child credit and the education incentives in the legislation would offer $102 billion of tax relief through 2002. Through the year 2007, they account for $225 billion in cuts.

The balance of Archer’s tax cuts comes in the form of new savings incentives, alternative minimum tax relief, and estate tax relief. In the near term, these changes produce $25 billion in tax cuts, but after 2002 they grow in importance so that the total cost of these items through 2002 is $117 billion.

A number of controversial revenue raisers were discussed by Joint Committee on Taxation and House Ways and Means Committee staff, and were ultimately rejected by Archer, including changes to the tax treatment of stock options, and the President’s proposals to: require stock basis averaging; a reduction in the dividends-received deduction from 70% to 50%; elimination of the 50/50 export source rule; extension of the Federal Unemployment Tax Act surcharge; and repeal of both the lower of cost or market and the components of cost inventory accounting methods.