Tax And Budget Matters Expected To Dominate Congressional Debate - Brief Article

Nation's Business, Oct, 1998 by James Worsham

Taxes are expected to be a major topic of debate as Congress races against the deadline for finalizing a federal budget and passing spending bills for fiscal 1999, which begins Oct. 1. As lawmakers returned from their August recess, the House and Senate remained far apart on the question of how much to cut taxes to take advantage of the projected $63 billion surplus in the fiscal 1999 budget.

Among the tax items expected to be taken up before the lawmakers go home to campaign for the November elections are several business tax breaks that have expired or are slated to expire. Those items include two tax credits that have proved to be important to many small businesses; both expired June 30. One is the research-and-experimentation tax credit, which allowed a firm to take a 20 percent credit for research-and-development costs above a base amount of up to 50 percent of the firm's current research expenditures. The other expired tax break is the work-opportunity tax credit, which allowed a firm to take a credit of 40 percent of the first $6,000 of wages paid to welfare recipients, high-risk youth, and other disadvantaged people who worked more than 400 hours a year. For those who worked less than 400 hours, the credit was 25 percent. Meanwhile, lawmakers still must agree on a budget for fiscal 1999 as well as the specifics of related spending bills to fund government programs. None of the 13 appropriations bills had cleared Congress when the lawmakers recessed. The House and Senate have passed budget resolutions calling for about $1.7 trillion in federal spending in 1999, but the two versions differ in some provisions. For example, the House offers $101 billion in tax cuts over five years, while the Senate allows $30 billion. With their eye on the budget surplus, lawmakers are expected to consider various tax-reduction proposals, including further reductions in capital-gains and estate taxes.