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$69 Billion Shortfall Produced by Clinton Budget, Congressional Estimators Say

Monday, March 3, 1997

OnLine

The Congressional Budget Office’s estimate, released March 3, that the President’s fiscal 1998 budget plan would produce a $69 billion deficit in 2002 led congressional leaders to speak less optimistically about the prospects for a balanced budget deal than they did earlier in the year.

Clinton’s plan represents a "vain attempt" at balancing the budget, House Budget Committee Chairman John Kasich, R-Ohio, said. "We’ve got to turn the rhetoric into reality."

The congressional estimator’s projection differs from the administration’s estimate, which projects their plan would produce a $17 billion surplus in 2002.

Budget analysts are reviewing the CBO estimate to determine why Congress’s and the administration’s estimates on the deficit differ. Identifying the areas of disagreement will determine where the battle lines on the budget will fall.

Concurring with estimates produced by the staff of the Joint Committee on Taxation, CBO estimates show a $23 billion tax hike over the fiscal 1997 through fiscal 2007 period, if the President’s plan were enacted. The administration has not produced detailed estimates for 1997 through 2007, but claims its plan in general cuts taxes.

Do it again

Several GOP Congressional leaders, including Senate Majority Leader Trent Lott, R-Miss., called upon Clinton to resubmit his budget so that it balances.

Similarly, House Ways and Means Committee Chairman Bill Archer, R-Texas, urged Clinton to resubmit a budget that includes permanent tax cuts, not ones that expire.

White House spokesman Mike McCurry responded to the calls from legislators, saying, "It’s not going to happen. Let’s move ahead with the process."

When the President met with congressional leaders earlier this year, they agreed to form task forces to work out differences between Congress and the President over the budget. Despite the gloomy news about the President’s proposal, some of the task forces will begin discussions this week, White House and Congressional sources indicated.

IRS Issues Business Plan: The Internal Revenue Service and the Treasury Department issued the 1997 regulatory business plan containing a non-exclusive list of 167 guidance projects it plans to complete this year.

The highlights of this year’s list include guidance on the tax consequences of switching from corporate to partnership status under the recently issued check-the-box regulations, capitalization issues, transfer pricing issues, and broad guidance on the research tax credit.

In the introduction to the list, the IRS indicated it would work on additional projects as the need developed through the year.

The business plan also includes a list of 84 regularly scheduled items that the IRS plans to issue this year.

Estate Tax Relief Proposed: House and Senate Republicans announced March 3 that they will offer a bill to repeal the estate and gift tax on the grounds that it does not raise enough revenue to justify the nuisance.

Rep. Christopher Cox, R-Calif., and Sen. Jon Kyl, R-Ariz., at a press conference said the bill already has been co-sponsored by a bipartisan group of 131 House and Senate members.

Estate taxes are extremely costly to collect, a summary of the bill explained. Enforcement and compliance costs account for 65 cents of every dollar raised by the tax, it said.

IRAs Help Investors: Investors in Individual Retirement Accounts benefit from the tax-favored treatment that these investment vehicles offer, the staff of the Joint Committee on Taxation said in a pamphlet released March 3.

For that reason, the expansion of IRAs could be expected to increase demand for otherwise taxable instruments at the expense of instruments that are tax-favored under current law, said the pamphlet, "Description and Analysis Of Tax Proposals Relating To Individual Saving and IRAs."