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News & Views |Senate Limits Scope of R&D Credit, Tax Cuts to Ten YearsWednesday, July 28, 1999 OnLine The Senate agreed July 28 to sunset the $792 billion tax cut after ten years, during its first day of debate on the bill (S. 1429) that includes marriage penalty relief, expanded individual retirement accounts, and an extension of the research and development tax credit. "After the first 10 years, these tax cuts explode, endangering the fiscal integrity of this country," said Sen. Kent Conrad, D-N.D. The sunset provision has the greatest impact on the permanent extension of the research and development tax credit, which the Senate Finance Committee had approved. The credit now will expire at the end of fiscal year 2009. Senate Majority Leader Trent Lott, R-Miss., raised the sunset issue in connection with a
Senate rule that was put in place when budget deficits were running very high. Lott raised
the issue to prevent Democrats from using the sunset to embarrass Republicans. Senate
Finance Committee Chairman William Roth's, R-Del., efforts to waive the rules failed when less
than sixty Senators did not agree to set aside the rule. |
Amendments Expected A number of substitute tax plans will be offered July 28, but none are expected to win approval. Amendments that address, expand, or create specific tax incentives and offer offsetting tax increases are expected July 29. No specifics are available about revenue offsets that are under discussion, but Sen. Paul Wellstone, D-Minn., is expected to offer an amendment relating to corporate tax shelters, congressional aides said. Wellstone is likely to offer language similar to what Rep. Lloyd Doggett, D-Texas, offered
in the House that would codify the economic substance doctrine that the Treasury Department claims already can
be found in current law. The tax benefits of a transaction are compared to the deal’s
economic benefits to determine whether the transaction makes sense from a business
perspective and from a tax perspective, under the economic substance doctrine. |
The Debate GOP senators praised the bill, pointing out that huge budget surpluses should be sufficient to pay for tax cuts. Roth emphasized the need to provide taxpayers relief from high tax burdens and to give savers and investors incentives. Democrats, led by Sen. Daniel Patrick Moynihan, D-N.Y., the ranking minority member of the Senate Finance Committee, argued that the $792 billion tax cut would make protecting Social Security and buying down the federal debt nearly impossible. Federal Reserve Board Chairman Alan Greenspan offered comments that reinforced the concerns of Democrats. "My preference is to go as far as we can in paying down the debt," Greenspan said in testimony before the Senate Banking Committee. When asked when enough debt reduction will have been achieved to allow for a tax cut, Greenspan said, "I'd say — the word ‘several years’ strikes me. In other words, one year, two years. ... I recognize that it is very difficult to sit with a surplus without doing something with it." Greenspan also provided fuel to Republicans who argue that unless taxes are cut,
Congress will spend the surplus. "I very strongly would argue against using the
surplus for new spending. If that appears to be coming, I would favor tax cuts even in the
short term." |
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