Ashcroft Unveils Middle-Class Tax-Cut Proposal

Monday, Jan. 12, 1998

OnLine

Sen. John Ashcroft, R-Mo., Jan. 12 offered a broad tax-cut proposal that is designed to help middle-class families by cutting marginal income tax rates and making Social Security payroll taxes deductible.

Too much emphasis has been placed on reducing the cost of capital for business and not enough has been done to help the average American family, said the senator, who hopes to gain the GOP presidential nomination for 2000.

"While Wall Street soars, main street struggles. Median household income is down and the tax burden on the typical two-earner family is near an all-time high," Ashcroft said in a speech to the American Enterprise Institute.

Ashcroft’s plan does not exempt savings and investment income from taxation. Unlike the national retail sales tax-reform plan from House Ways and Means Committee Chairman Bill Archer's, R-Texas, or the flat tax proposal from House Majority Leader Dick Armey, R-Texas, Ashcroft's proposal targets relief at middle-class wage earners.

Details of the Ashcroft plan

Making an individual’s Social Security tax payments deductible from income taxes would put them on par with businesses, which already can deduct their Social Security payments, Ashcroft said.

The number of marginal tax rate brackets would be reduced from five to four, under the proposal. The new rates would be 10%, 20%, 30% and 39.6%, producing cuts for all taxpayers except the richest Americans.

Other elements in Ashcroft’s plan include eliminating the marriage penalty by allowing couples to divide their incomes to take advantage of lower marginal rates, doubling the cap on contributions to individual retirement accounts, ending the earnings test for Social Security benefits, repealing the estate tax and the alternative minimum tax for individuals and corporations, increasing the cap on expensing, ending the phase-out on miscellaneous tax deductions, and removing the holding period for capital gains.

The proposal, which would cost nearly $1 trillion over five years, would be paid for by extending the limit on government spending, replacing entitlement programs with block grants to the states, or through the budget surplus. Ashcroft acknowledged that the details of the offset must be developed further.

Environmental Tax Proposals Emerging: The administration is examining ways to structure tax credits for cars and equipment designed to minimize the amount of greenhouse gases they emit into the atmosphere, according to published reports.

The items that would qualify for the credit include heat pumps for residential use, fuel cells used to generate energy for commercial structures, and vehicles that achieve greater fuel economy than other vehicles in their class, the reports said.

President Clinton is expected to unveil during his Jan. 27 State of the Union address precise details about his proposal to create $5 billion worth of incentives to reduce greenhouse gases.

Archer Short on Details about Tax Cuts: Archer Jan. 11 expressed support for passing a broad tax cut this year, but declined to specify what type of reduction should be enacted as a result of the budget surplus.

"We shouldn’t be balancing the budget on the backs of taxpayers," Archer said on NBC’s Meet The Press. Tax cuts should be reduced to cut the size of the federal government and to return money to the pockets of working Americans, he added.

White House budget director Franklin Raines said the administration would reject the GOP’s call for broad cuts and instead would focus on targeted reductions, such as environmental tax credits and incentives to encourage child-care coverage. Raines spoke on ABC’s This Week With Sam and Cokie.

Also making an appearance was former Rep. Dan Rostenkowski, D-Ill., the former chairman of the Ways and Means Committee, who urged lawmakers not to give into their worst instincts and pass a large-scale tax cut.

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