A GOP Tax Cut: There's a Will, but Is There a Way?
President Clinton's euphoria after his State of the Union message wasn't just a reaction to glowing TV ratings. Clinton seemed convinced that his vow to reserve 62% of the budget surplus for saving Social Security would block Republicans from passing costly new tax cuts.
But GOP hope springs eternal. While they admit Clinton's plan is clever, Republican lawmakers are countering with The 38% Solution: They aim to use the remaining third of the surplus for tax relief. True, Clinton has plans for the money, among them paying for a Medicare fix, more Pentagon spending, and education initiatives. But Republicans will ignore all but the defense request to free up funds for a Reagan-size tax cut that can entice voters and unite the GOP's factions.
Sounds swell. But even if the projected $700 billion surplus is for real, the GOP can't afford its tax wish list. Here are some of the goodies:
-- Reagan redux. Alarmed that the tax burden is at a peacetime high of 21%, many GOP lawmakers want across-the-board rate reductions. One group of senators, including Assistant Majority Leader Don Nickles of Oklahoma, backs an immediate 10% income tax rate cut. House Majority Leader Richard K. Armey (R-Tex.) would slash all federal taxes, including the payroll tax, by 10%. But even a 10% income tax rate cut would cost at least $700 billion over 10 years, according to congressional estimates. That would eat up the entire surplus. A senior Senate GOP aide says: "We'll find the money."
-- Family fun. Republicans have promised social conservatives that they'll ease the squeeze on two-earner married couples. "We don't want to have to choose between love and money," says Texas Senator Kay Bailey Hutchison, sponsor of a bill to eliminate the marriage penalty. But even limited relief could cost upwards of $50 billion over 10 years.
-- Business breaks. Already, business lobbyists are jostling for favors. The National Association of Manufacturers backs a rate cut as a booster shot for the economy. But the National Federation of Independent Business and other small-business groups want more. Says top NFIB lobbyist Dan Danner: "Our priorities would be eliminating the estate tax and decreasing payroll taxes." Friendly lawmakers, including House Ways & Means Committee Chairman Bill Archer (R.-Tex.), have long backed cutting levies on estates over $650,000.
Of course, before these ideas stand a chance, there has to be some tiptoeing over the third rail, at least as long as Clinton's vow to fix Social Security remains popular. Republicans "are going to first have to agree on a Social Security bill," says Representative Charles B. Rangel (D-N.Y.), ranking Democrat on Ways & Means. "Then we'll decide on a tax cut." But with impeachment fraying Hill tempers, a pension deal will be elusive.
A far tougher problem for GOP tax-cutters may be cost. If they just staple all their proposals together, the price tag would be a tempting target for Clinton and his party.
To complicate matters, Clinton's fancy footwork on Social Security could carry over to taxes. He may try to pass off his new individual retirement savings plan as a tax credit. Why? To claim the proposal is actually a $350 billion tax cut. "You're not going to see us in a no-tax-cut world," vows a senior White House aide. "It will be more like, `Our tax cuts are better than yours for working families."'
If Republicans are to win that battle, they'll have to come up with a tax package that placates the party's constituencies--without shredding GOP claims to fiscal restraint. Normally, this would be a no-brainer. But nowadays, even GOP die-hards wonder whether their Hill team can pull it off.EDITED BY LEE WALCZAKReturn to top
More Pension Palaver?
Another Social Security Commission? A bipartisan panel to come up with a fix for the system could be in the air. Senator Judd Gregg (R-N.H.), who co-chairs a Senate GOP task force on Social Security, may soon call for one. A top White House aide doesn't dismiss the idea, though the Administration will sound out congressional Democrats before committing. The group would be given only a few months. Says Gregg: "We've got to have the President in the room."Return to top