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Gross Tax-Cut Figure Slipping

Friday, May 9, 1997

OnLine

The gross $135 billion tax-cut figure in the budget agreement should be viewed as a cap on the size of the cut because the final figure could be lower, Senate Majority Leader Trent Lott, R-Miss., told reporters May 9.

"We are committed to trying to achieve a minimum of $85" billion in tax cuts, Lott said. The budget pact between the White House and Congress called for $50 billion in tax increases and $135 billion in tax cuts, netting out to $85 billion.

The gross tax-cut figure could be slipping because the House Ways and Means Committee does not believe it can raise the $50 billion in tax increases needed for a $135 billion cut, Lott said.

The gross tax cut probably will wind up in the $117 billion to $135 billion range, congressional aides said. The amount of the cut will include three elements: an $85 billion tax cut offset by policy changes assumed by the agreement; $32 billion in revenue raised from the extension of the airline ticket tax and other widely accepted hikes, and whatever tax increases the tax-writing committees can agree to up to $18 billion.

The slippage in the gross tax-cut figure means that legislators will have to shoe-horn the same number of tax reduction elements into the same package. Budget negotiators are committed to providing capital gains relief, estate tax reform, a child credit, individual retirement account expansion, and education incentives regardless of the size of the cut, so some elements will be pared down sharply, as the gross figure falls.

Won't use EITC

Lott denied reports that GOP legislators plan to step up compliance on earned-income-tax-credit fraud as a way to raise money. "We’re not going to use the EITC," the majority leader said. Political observers note that if congressional Republicans proposed scaling back the EITC to pay for tax cuts perceived to benefit the rich, liberals in Congress would have a field day attacking GOP leaders.

The lack of agreement between the White House and Congress on the precise details on the tax cuts and other elements of the budget agreement could force the House and Senate Budget Committees to postpone marking up a budget resolution. Both committees plan to mark up a budget resolution sometime during the week of May 12.

Only after a budget resolution, which outlines spending and tax policy priorities, passes the House and Senate will the House Ways and Means Committee mark up a tax bill specifying the tax cuts and increases. If the budget resolution is passed by Memorial Day, as projected by congressional leaders, the House Ways and Means Committee could hold a mark up during the week of June 2, congressional sources said.