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Republicans Disagree with Gingrich’s Proposal to Postpone Tax Cuts

Tuesday, March 18, 1997

Deloitte & Touche OnLine

Many Republicans disagreed March 18 with House Speaker Newt Gingrich, R-Ga., suggestion that tax cuts be put off until after the federal budget is balanced, while Democrats took pleasure at the disagreement among Republicans.

Republicans remain "absolutely committed" to tax cuts "this year," and passing the cuts independent of the balanced budget bill remains an option, Senate Majority Leader Trent Lott, R-Miss., said.

A group of congressional Republicans led by Rep. David McIntosh, R-Ind., wrote a letter to congressional leaders similarly emphasizing the need to balance the budget and pass tax relief at the same time. The letter was signed by more than 20 House Republicans.

The fact "that President Clinton chose to veto last year’s Balanced Budget Amendment Act does not mean we should walk away from these important goals," the letter said, emphasizing the group’s commitment to tax cuts.

Roth offers budget

Senate Finance Committee Chairman William Roth, R-Del., reiterated his support for immediate tax cuts and proposed his own budget that balances the budget, as well as cuts taxes.

"The notion of having to choose between balancing the budget and delivering tax relief is a false choice," Roth said in a press release unveiling his proposal that includes tax cuts offered by Senate Republicans. Roth proposed a net tax cut of $143 billion and an adjustment to the Consumer Price Index.

When?

The lack of consensus among the GOP probably will make it difficult to pass a budget resolution by mid-May, despite what congressional leaders have said over the past few days.

If action on the non-binding resolution that guides federal spending and tax policies is completed according to the leadership’s timetable, the date of first committee action by the tax-writing committees probably would have been late May or early June, congressional aides said. Now the date of first committee action, which is the effective date of many of the Clinton budget’s capital market provisions, might have to be delayed due to the lack of consensus on the tax-cut issue.

Noting the disagreement among the GOP, Senate Minority Leader Tom Daschle, D-S.D., described the lack of consensus as a budgetary "civil war." "It’s fun to see them acting like old-time Democrats," he added.

Archer Praises IRS Oversight Plan: House Ways and Means Committee Chairman Bill Archer, R-Texas, March 18 lauded the Treasury Department’s recommendations for increased oversight of the Internal Revenue Service, but he continued calls for reforming the tax code.

Increasing oversight is like putting "a fig leaf on the problem. Yes, a fig leaf is better than no clothes at all...but the crux of the problem is the tax code itself," Archer testified at the Ways and Means Oversight Subcommittee hearing.

Deputy Treasury Secretary Larry Summers suggested creating an IRS oversight panel that reports to the Treasury secretary, not to the IRS commissioner.

The current tax code creates unnecessary frustration among taxpayers and it dampens productivity, Archer said. Excessive amounts of paperwork and wasted time associated with complying with the current code are examples of why there is a need to "fundamentally reform tax laws," he said.

Rep. Rob Portman, R-Ohio, who also sits on the National Commission on Restructuring the IRS, agreed with Archer’s comments, but said that the commission is unlikely to endorse tax reform as a solution to the IRS’ problems. The commission has looked into the possibility of appointing an oversight panel that is independent of the Treasury or IRS.

Deputy IRS Commissioner Mike Dolan responded to the complexity dilemma of the tax code by denoting the improvements the agency has made in customer service. In particular, Dolan highlighted the improved level of telephone access to information and to technological means of decreasing demand on the telephone system.

Oversight Subcommittee Chairman Nancy Johnson, R-Conn., acknowledged the agency’s attempts at improved access and also agreed with Archer’s calls for fundamental reform of the tax laws.

Johnson called for a continued honest dialogue between Congress and the IRS as part of the solution to the complexity problem. "No amount of technology and common sense can work unless we jointly focus on the complexity ... we need to talk more honestly about the tax code problems if we are going to back you."

The General Accounting Office in its testimony also affirmed the progress made by the IRS in the areas of telephone access and electronic filing but added several recommendations for the remaining 1997 filing period as well as for fiscal year 1998.

Tax Relief For Home Businesses Offered: Senate Small Business Committee Chairman Kit Bond, R-Mo., March 18 introduced legislation to assist home-based businesses by proposing to make health-care costs for the self-employed fully deductible, to restore the home-office deduction, and to clarify the definition of an independent contractor.

"Unfortunately, home-based entrepreneurs face many unique problems generated by a tax code that has not kept pace with today’s reality," Bond said in a press release.

Assistant Senate Majority Whip Don Nickles, R-Okla., and Sen. Olympia Snowe, R-Maine, are original co-sponsors to the bill. A companion bill also will be introduced in the House.

JCT Issues Capital Gains Study: The Joint Committee on Taxation issued a pamphlet describing the various Individual Retirement Account, capital gains tax cut, and estate tax relief proposals.

The pamphlet, JCS-5-97, was prepared in anticipation of the March 19 House Ways and Means Committee hearing. Much of the material in the pamphlet already appeared in earlier pamphlets put out by the committee.