Give Part Of The Surpluses Back To Its Creators

Nation's Business, Nov 1, 1998

Democrats face formidable problems entering the November elections. One is the resurgence of the Republican Party in state and congressional elections in recent years. Another is the historical pattern in which the party holding the White House has lost seats in off-year balloting in congressional races. That vulnerability has been compounded by President Clinton's myriad troubles.

Not content with those liabilities, Clinton and the overwhelming majority of Democratic members of Congress have courted further political danger by opposing in the weeks before the election an action that clearly enjoys great support from voters--significant tax relief

The president and the Democrats had two key weapons: One was a promised veto of the bill if it reached Clinton's desk. The other was a Senate rule requiring 60 votes for consideration of this measure--five more votes than the Republican majority typically commands.

The Democratic attack targeted legislation designed to provide economic stimulus that would come through tax relief for small businesses, which could put the tax savings into expansion and jobs, and through increased consumer spending as taxpayers would retain more of their earnings.

The reductions--$80 billion over five years-would have been financed with a small part of the projected federal budget surplus.

Rep. Bill Archer, R-Texas, chairman of the House Ways and Means Committee and author of the tax bill, made the case this way:

"Given the weakness in the global economy, now is exactly the time to create an economic stimulus by cutting taxes. The best way to keep our American economy strong is to let the people keep more of their money Taxes on the American people are at the highest level in our nation's peacetime history ... The only way to prevent the politicians from spending money is to take it away from them before they have a chance to waste it." Archer's plan called for:

* Raising the amount excluded from the federal estate and gift tax--currently $625,000-to $1 million as of next Jan. 1, instead of Jan. 1, 2006, the date the change is scheduled to take effect.

* Increasing the tax deduction for health-insurance costs of the self-employed, now 45 percent, to 100 percent beginning with the 1999 tax year. Under current law, the full deduction would not be reached until 2007.

* Raising the maximum equipment-expensing allowance of $18,500 to $25,000 as of the 1999 tax year. Present law provides for raising the allowance, which businesses may take in lieu of depreciation, to the higher figure in 2003.

* Extending tax credits for research and for providing employment opportunities to welfare recipients, food-stamp recipients, former convicts, high-risk youths, and other targeted groups.

* Extending refunds of duties paid on imports from developing countries.

Archer also proposed broader relief for other taxpayer categories.

Recognizing the politically charged debate over whether federal surpluses should be used for tax relief or for shoring up the Social Security system, Archer recommended establishment of a Protect Social Security Account that would be guaranteed 90 percent of the total annual budget surplus for fiscal 1998 through 2008. That total is now estimated at $1.6 trillion.

The new Social Security account would help assure the long-range solvency of the retirement system. Opponents of using even a small part of the surplus for tax relief insist that all of the excess revenue be committed to Social Security

Archer offered a solid reason that President Clinton and the congressional Democrats who refused to support Archer's bill should keep in mind when major tax-relief legislation comes before them again:

"This bill is fully paid for ... by the tax dollars that hard-working, overtaxed Americans sent to Washington. It's their income-tax payments that created the surplus in the first place."