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News & Views |Treasury Secretary O'Neill Pushes for Fast Passage, Lid on Bush Tax Cut PlanWednesday, February 14, 2001 OnLine President Bush wants the income tax rate cuts in his tax plan to be implemented retroactively, and he stands firm on his position that the package should be held to no more than $1.6 trillion over 10 years, Treasury Secretary Paul O'Neill told a February 13 House Ways and Means Committee hearing. The cost of applying the income tax rate cuts retroactively to January 1, 2001 -- which committee Democrats put at $400 billion over 10 years -- must come out of the $1.6 trillion tax cut total, O'Neill said. O'Neill disputed the accuracy of the $400 billion figure, however. Some GOP congressional leaders want tax cuts greater than $1.6 trillion. You Decide -- Of the tax plan's particulars -- which include marriage penalty and estate tax relief as well as income tax rate reductions -- O'Neill told the committee members that "it's up to you to decide what the American people will get." He also reiterated the administration's position that whether the tax plan is enacted in parts or as a single piece was up to Congress. The Treasury secretary pushed firmly for a retroactive tax cut to help stimulate the slowing economy. "There is no doubt that we have slowed down very appreciably from where we were," he said. "If we're going to do it, why not now?" But several Democrats argued that the size of the tax
cut should be decided within the context of the total budget. "We can
only support a tax cut when we know what's going to happen with the rest
of the budget," said ranking Democrat Charles Rangel of New York.
Likewise, after O'Neill said he would submit a plan for supporting Social
Security once Congress finishes with the tax cut plan, Rep. Robert Matsui,
D-Calif., told O'Neill, "I wish you would come up with Social
Security before you come up with a tax bill." |
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Staying on
Script -- O'Neill's support for tax cuts as an economic stimulus
contrasted with his answers at his nomination hearing before the Senate
Finance Committee on January 17. In that testimony, he stopped
short of endorsing tax cuts as stimulus and said that Federal Reserve
Board monetary policy would be the most certain way to jump-start the economy.
(For prior
coverage, see Tax
News & Views, Jan. 19, 2001.) At the Ways and Means hearing, O'Neill worked hard to stay on script for the administration's tax cut plan. For instance, he downplayed the need to revise the alternative minimum tax (AMT) when Rangel asked whether he would be willing to change the law to help those middle-income taxpayers who are made vulnerable to the AMT because of the benefits they receive from Bush's tax cuts. Although O'Neill signaled some flexibility on the AMT issue, saying that "there is no doubt that eventually we have to work together to strip the AMT out," he insisted the AMT is not a top priority now. He noted that even those middle-income taxpayers newly affected by the AMT would come out ahead under the Bush tax plan. O'Neill also discouraged the suggestion that there
should be an increase in the income eligibility levels for taxpayers who
benefit from the Earned Income Tax Credit -- a suggestion put forward by
Rep. William Coyne, D-Pa. Calling Coyne's query worthwhile, O'Neill said
it did not change the need to pass Bush's tax cut. |
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O'Neill indicated that he opposes the idea of a trigger to possibly suspend the tax cuts in later years, an idea that has been put forward by moderate Republicans and Democrats. Under such a trigger, the proposed cuts would be scaled back if the surplus does not materialize at the levels now projected. Rather, O'Neill said he would be willing to support a positive trigger, under which, after Bush's $1.6 trillion tax cut plan has been executed, more tax cuts would be triggered if the surplus were to grow. Estate Tax Relief -- Several GOP members called for an end to the estate tax, a measure that President Clinton vetoed last year. Rep. Sam Johnson, R-Texas, argued that ending the estate tax would help to boost the economy. Responding to criticism from some charitable organizations, Rep. Jennifer Dunn, R-Wash., said that ending the estate tax would not cut into charitable contributions. Many such organizations believe that the estate tax is important to charitable giving and that tax planning related to the estate tax encourages some giving that would otherwise not happen. O'Neill agreed with Dunn that people would still give even if the estate tax were repealed. |
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