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Archer Criticizes Clinton Budget for Sunsetting Tax Cuts

Wednesday, March 5, 1997

OnLine

House Ways and Means Committee Chairman Bill Archer, R-Texas, criticized President Clinton’s tax-cut proposals on the grounds that they are not permanent and expire in 2000.

Congress must vote to extend the education and dependent-child tax cuts and the Individual Retirement Account proposal in 2000 in order for them to be in place beyond that year, Archer complained.

Assistant Treasury Secretary for Tax Policy Don Lubick defended the proposal on the grounds that the Treasury Department had to write the legislative language in a way that lets the tax cuts sunset, rather than deactivate with a trigger mechanism.

"Technical reasons" associated with the Congressional Budget Office’s scorekeeping rules forced the administration to pursue this approach, the Treasury official said. CBO rules require estimates to ignore triggers.

Treasury’s intent is to have the cuts expire in 2000 only if budget estimators at that time predict the deficit will not be eliminated by 2002, Lubick told the panel.

Treasury is trying to make it sound as if CBO required the administration to sunset the cuts, Archer said. "CBO does not mandate any statutory language."

Tuition inflation

Committee members expressed concern about the impact the Clinton education proposals would have on college tuition costs.

The budget would create a $1,500 tax credit for individuals who maintain a B average and who stay drug-free, or a $10,000 education-related deduction for families.

Rep. Phil Crane, R-Ill., observed that community colleges in the Chicago-area charge students $800 in tuition, but the Clinton plan would create a credit worth $1,500. He asked whether a false incentive would be created by the proposal that would encourage colleges to raise tuition.

Lubick said tuition inflation should not be a concern because there are "many restraints" on the amount of money colleges charge students, aside from government-provided incentives.

Other members questioned the administrative burden the proposal would place on the Internal Revenue Service. Making the credit available only to student maintaining a B grade point average and to those staying free of drugs could create administrative problems for the IRS, Rep. Kenny Hulshof, R-Mo., warned.

Lubick said that information to administer the credit is readily available, so a burden will not be placed on the Service. "IRS will not be a policeman. We will not go around reading bluebooks."

Permanent R&D Credit Proposed: Bipartisan members of the House Ways and Means Committee and the Senate Finance Committee introduced a bill today making the research and development tax credit permanent. A similar provision introduced last year would have cost the Treasury $8 billion over five years.

The bill’s sponsors are: Reps. Nancy Johnson, R-Conn., and Robert Matsui, D-Calif., and Sens. Max Baucus, D-Mont., and Orrin Hatch, R-Utah.

Still No Plan For TSM: The chair of the House panel in charge of funding for the IRS would recommend giving the agency money to modernize, if an adequate plan were presented.

Assistant Treasury Secretary Larry Summers told the panel that IRS has made fundamental changes in the way it plans and manages Tax Systems Modernization.

House Treasury, Postal Service, and General Government Appropriations Subcommittee Chairman Jim Kolbe, R-Ariz., however, is dissatisfied. IRS will not be given additional funds until it presents an acceptable plan, he said during a hearing.

Hearings On Savings Plan Scheduled: The House Ways and Means Committee will hold a hearing March 19 on IRA expansion, and on estate tax and capital gains relief, a press release said.

The Senate Finance Committee will hold a similar hearing March 6.

Balanced Budget Amendment Defeated: The Senate late March 4 defeated the proposal to amend the Constitution with a new requirement that the federal budget be in balance by 2002. The vote on the amendment was 66 to 34. Two-thirds of the Senate, 67 members, had to vote in favor of the measure for it to pass.