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News & Views |Senate Rejects Changes to Tax Bill: Final Approval Expected TomorrowThursday, July 29, 1999 OnLine The Senate July 29 defeated several political amendments to the ten-year $792 billion tax cut bill (S. 1429), which is expected to win final approval July 30. A House-Senate conference charged with wrapping up the differences between the two versions could quickly complete its work by the end of next week, which is when the August congressional recess is set to begin. House Majority Leader Dick
Armey, R-Texas, opposes this timetable and would prefer that Congress wait
until September when lawmakers return from their summer recess to send the bill to the
White House for certain veto by President Clinton, congressional aides said. Armey does
not want to give Clinton the opportunity to grab headlines by vetoing the bill when
lawmakers are out of session and cannot defend themselves. |
Tax Shelter Amendments No senator has come forward publicly to propose a broadly written amendment that would shut-down corporate tax shelters. Such an amendment was expected during committee action on the bill, but was not offered. Treasury Department officials continue to work to get such an amendment proposed, but one senior official said no senator has been found, who is willing to offer the proposal. Even if a broad tax shelter amendment is offered, it most probably would be ruled out of order under Senate rules barring non-germane proposals, according to a senior budget committee aide. Sen. Paul Wellstone, D-Minn., who some congressional aides said would be the likely proponent, only has indicated his willingness to offer an amendment that would strike the provision that would allow corporations to allocate interest expenses on a worldwide basis. Moderate Plan to Be Rejected The Senate late July 29 is expected to reject a $500 billion tax cut offered by Sen. John Breaux, D-La., and Sen. John Chafee, R-R.I. The moderate plan – in terms of size and scope – may offer clues about a compromise tax cut that many congressional aides believe could emerge this fall. One significant element to the plan is Breaux’s proposal for a capital gains exclusion, instead of a capital gains tax rate cut. The provision would give investors an exclusion from tax on a portion of their capital gains: the first $750 for individuals and the first $1,500 for couples. An exclusion would benefit more small investors than would a capital gains rate cut, and it would simplify tax return preparation for many investors who are uncomfortable with Schedule D, which is used to calculate capital gains, congressional aides said. The proposal also would remove 3 million low income taxpayers from the tax rolls, shift 4 million taxpayers from the 28 percent bracket to the 15 percent bracket, accelerate the estate tax unified credit exemption increase to $740,000 in 2003 and $1 million in 2004, increase Section 179 expensing to $30,000, extend the research and experimentation tax credit for ten years, and include all of the Senate Finance Committee approved tax increases. The Breaux and Chafee proposal devotes fewer tax benefits to savers and investors than does the bill offered by Finance Committee Chairman Sen. William Roth, R-Del., which would expand individual retirement accounts and other savings vehicles. Other Amendments Rejected During the debate late July 28 and July 29, the Senate defeated a series of amendments designed mainly to deliver a political message to voters about particular issues. A Democratic amendment that would have cut taxes by $290 billion over ten years was defeated overwhelmingly, in a vote of 39 to 60. The failure of Sen. Daniel Patrick Moynihan, D-N.Y.., the ranking Democrat on the Senate Finance Committee, to get all 45 of his fellow Democrats to support his amendment suggests that a majority of Senators, including many Democrats, disagree with Clinton’s pledge not to enact tax cuts worth more than $300 billion. Other rejected amendments would have ensured that all Social Security surplus revenues
are used for Social Security reform or to reduce the debt; sent the measure back to the
Senate Finance Committee to incorporate Clinton’s Medicare proposals, delayed the tax
cuts until Social Security is reformed; substituted all the tax cuts with an
across-the-board tax cut; and provided more Medicare funding. |
IRS Restructuring One Year Later: "We still have to fix the IRS, and it won’t be fast or risk-free," said Internal Revenue Service Commissioner Charles Rossotti in a July 29 speech before the National Press Club. Rossotti said that in the 12 months since the IRS Restructuring and Reform Act was signed, the IRS has made some progress towards achieving its goal of providing high quality service to taxpayers while collecting taxes efficiently and fairly. The agency has established and communicated its new direction and attitude to employees, made concrete plans to organize around taxpayer needs, and taken the first steps towards implementing RRA changes. Despite these efforts, Rossotti acknowledged that problems persist and the agency is still unable to "deliver consistently an acceptable level of service to taxpayers." He said taxpayers still have difficulty getting through to the IRS and having their problems resolved quickly. In addition, the number of audits and collections have declined by 30 to 40 percent compared to two years ago, and there are weaknesses in the tax administration financial systems. Rossotti says the next 18 to 24 months will be critical to the agency’s reorganization efforts and there will be "serious consequences" if the agency doesn’t receive the $8.2 billion it requested for fiscal year 2000. The House passed an appropriations bill July 15 that gives the IRS $135 million less than it requested. The Senate version of the bill does not contain a similar cut. It is expected that at least $50 million will be restored to the budget when members of the House and Senate meet to resolve the differences between the two bills. |
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