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Tax Panel Approves
Views on Budget
Wednesday, March 11, 1998
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The House Ways and Means
Committee "will work to develop additional tax relief measures" in 1998,
according to a letter the panel approved by voice-vote March 11.
The letter to the House Budget
Committee is intended to guide the writing of the non-binding budget resolution, which
outlines Congress’ spending and tax goals for the upcoming fiscal year. The House
probably will not take up a budget resolution until after the spring break recess,
scheduled to start April 2.
Marriage penalty relief, further reductions in estate taxes, income tax reductions,
alternative minimum tax relief, repeal of the 18-month holding period for capital gains,
and an exemption for interest and dividend income were specifically mentioned in the wish
list as measures the Ways and Means Committee wants to work on this year.
More on tax reform
The panel also will continue hearings on fundamental changes to the federal tax system.
House Majority Leader Dick
Armey, R-Texas, supports replacing the current system with a flat tax and Ways
and Means Chairman Bill Archer,
R-Texas, supports a consumption tax.
A hybrid proposal was suggested by House Ways and Means Committee member Rob Portman, R-Ohio,
March 11. Taxpayers earning less than $100,000 per year would be exempt from the income
tax and the revenue loss would be made up by a new consumption tax, preferably a
value-added tax, under Portman’s plan.
The hybrid approach would retain the current system’s progressivity, encourage
savings and investment, and simplify the lives of most Americans, Portman said at a
meeting sponsored by the American League of Lobbyists.
Schmidt Baking Reversal Approved: The House
voted (233-186) March 11 to pass a trade bill (H.R.
1432) that would overturn the severance pay component of the Tax Court’s Schmidt
Baking decision.
Revenue would be raised under the African Growth and Opportunity Act by reversing the
part of the Schmidt Baking decision that sanctioned a transaction that enabled an
accrual-basis taxpayer to get an immediate tax deduction for employee severance and
vacation pay expenses.
The Schmidt Baking severance pay revenue offset also is included in several other
trade-related bills that have been approved, including the fast-track trade legislation
and the Caribbean Basin Initiative parity bill. If one of the measures is enacted, another
revenue offset will have to be found for the other measures.
Reversing the Schmidt Baking decision with respect to severance pay would
raise $281 million over five years.
Transit-Related Tax Amendment Approved: The
Senate by voice-vote March 11 approved a modified version of the tax-related amendment to
the surface transportation bill (S.1173),
which includes an extension of the gasoline excise tax and other tax-related measures.
The substance of the amendment was approved by the Senate Finance Committee last
fall and was offered on the transportation bill by Senate Finance Committee Chairman William Roth, R-Del.
Before the underlying measure can be brought up for a final vote, senators must agree
on the total amount of transportation spending.
The House has not acted on the transportation bill yet and could reject the Senate
language on the grounds a revenue bill did not originate in the House. All tax bills must
originate in the House under the Constitution.
The amendment approved by the Finance Committee last year extended a modified version
of the ethanol tax credit and extends the gasoline excise tax.
Roth Offers New Savings Plan: Roth March 11
introduced a bill that would set aside the projected $670 billion budget surplus for a
retirement plan for workers that is similar to the plan federal employees currently have.
To capture the $670 billion estimated to be produced over the next 11 years, 1.4% of
the federal payroll tax would be set aside for the new savings accounts.
"Using budget surpluses to create retirement accounts represents an excellent
first step toward shoring up Social Security for the long run and it accomplished this in
a way that does not adversely affect the current program," Roth said.
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