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Kasich Backs Off Fight on Cutting Corporate Tax Breaks

Thursday, March 20, 1997

Deloitte & Touche OnLine

House Budget Committee Chairman John Kasich, R-Ohio, introduced a bill March 19 designed to reduce the benefits corporations receive from the federal government, but the bill does not include any tax-related provisions.

Kasich took the lead last year among Republicans in the fight to reduce so-called "corporate welfare" provisions that critics said provided firms with unwarranted governmental spending subsidies and tax breaks.

Kasich and House Ways and Means Committee Chairman Bill Archer, R-Texas, tousled over the issue when Archer complained Kasich’s efforts infringed on the tax-writing panel’s jurisdiction. Curtailing tax benefits for corporations is the same as increasing their taxes, Archer said opposing the suggestion.

Typically, the Budget Committee in its annual budget resolution sets the appropriate level of revenues and outlays each year and it is up to the appropriate committee of jurisdiction to raise or cut spending or raise or cut taxes to meet those targets. By trying to write corporate tax provisions into the budget, Kasich was usurping the tax-writing panel’s right to determine how the revenue goals would be met, Archer claimed.

By not offering any tax-related provisions, Kasich deferred to the Ways and Means Committee, which has jurisdiction over the tax code, a congressional aide said.

Capital Gains Indexing Bill Offered: Rep. Ed Royce, R-Calif., introduced legislation March 20 allowing investors to index for inflation the underlying basis of capital assets.

"This legislation will not only strengthen the economy, but will benefit all Americans," Royce said in a press release. "Whether you are a homeowner, small business owner, or amateur investor, you will be helped by this legislation."

Revenue-Raising Options Outlined: The Congressional Budget Office issued its annual list of deficit reducing options, and this year’s 39-item list contains no new revenue-raising proposals.

The list contained in the CBO publication, Reducing the Deficit: Spending and Revenue Options, is slightly shorter in 1997 than 1996 because Congress enacted the following items that were on last year’s list: curtailing certain corporate owned life insurance transactions, reducing the possessions tax credit, and repealing the preference for bad-debt reserves of thrift institutions.

Included on the list are proposals to amortize advertising costs; eliminate private-purpose tax-exempt bonds; reduce the rehabilitation and low-income housing credits; tax credit unions like thrifts; repeal the tax credits for extractive industries; capitalize the costs of producing timber; and repeal the partial exemption for alcohol from the excise tax on motor fuels.

Congressional Studies: Joint Committee on Taxation Chief of Staff Ken Kies announced March 20 that the long-awaited study of partnership issues should be released during the week of March 31.

The study on Internal Revenue Code Section 355 transactions will be available the week of April 7, Kies said.