Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, July 3, 1995 TAG: 9507030103
SECTION: NATIONAL/INTERNATIONAL PAGE: A1 EDITION: METRO
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium
They're not expecting to make any final decisions until September, but already two elements of the package - a $500-a-child tax credit and lower capital gains taxes - seem likely to survive in some form.
``It's going to be tough,'' said House Ways and Means Committee Chairman Bill Archer, R-Texas. ``But we're going to be very adamant about the capital gains reductions, and we're also going to be very adamant about the family child credit.''
But if the per-child credit and capital gains cut are adopted in their entirety, they'll cost $226 billion over seven years, leaving little room for any other cuts.
Archer and other senior Republicans say their goal is to shrink the package proportionately, leaving roughly the same balance between breaks for businesses and families.
House GOP Caucus Chairman John Boehner of Ohio, the House leadership's liaison with the diverse coalition of business, family and senior citizen groups that backed the contract, urged them at a meeting last week to refrain from turning on one another as the tax package shrinks.
``There's going to be some changes but they've got to keep their eye on the goal,'' Boehner said.
Perhaps the most politically delicate task will be reducing the per-child credit. House conservatives fought last spring to keep the income cutoff for the full credit at $200,000. However, many Senate Republicans on the tax-writing Finance Committee want to cut it to $95,000 or below.
``I think $200,000 just becomes a political football for the president and the administration to try to attack us and try to play this class warfare that we're for the wealthy,'' said Sen. Alfonse D'Amato, R-N.Y.
House Republican leaders, according to an aide who spoke on condition of anonymity, are considering freezing the credit at $500, rather than allowing it to increase with inflation.
They're also talking about making it a temporary, five-year credit, saving $57 billion, on the theory that by then a fundamental overhaul of the tax system will be enacted.
Other possibilities include delaying the credit's effective date or phasing it in. But Gary Bauer, head of the conservative Family Research Council, warned that family groups will oppose a phase-in if it ``starts at a figure that's insulting.''
The House's $63 billion reduction in capital gains taxes has four elements: halving the tax rate for individuals, lowering the rate for businesses, indexing gains to inflation and making losses on personal residences deductible.
Sen. Orrin Hatch, R-Utah, chief sponsor of the Senate capital gains bill, would save about $15 billion by dropping indexing. Archer has long championed indexing in the House but it enjoys less support among Finance Committee members.
``Everybody likes the concept of indexing until you start to implement it,'' said Sen. Don Nickles, R-Okla. ``I think it would be a lot simpler if you just reduce the rate and not do both.''
One cost-saving measure that is off the table, according to Archer, is making the eligibility date later than Jan. 1, 1995.
Interviews last week with Finance Committee members found no support for the House's more generous depreciation method for larger businesses, known as neutral cost recovery.
Senators also were eyeing a relaxation, rather than outright repeal, of the corporate alternative minimum tax, which puts a floor on depreciation and other business deductions.
And they're considering scaling back the House's $12 billion reduction in estate taxes by focusing it on family-owned businesses and farms.
Unprompted, Finance Committee members did not mention the contract's $53 billion in tax relief for the elderly as a priority. But when asked, Archer said it was an essential element.
Many lawmakers also want more generous Individual Retirement Accounts, pushed by Sen. William Roth, R-Del. If that plank gets trimmed, the piece that probably will survive is an increase in the annual contribution limit for non-working spouses to $2,000, the same as for working spouses now.
Unlike the House, the Senate has yet to go on record with details of a tax package.
Senate Majority Leader Bob Dole, R-Kan., said he didn't have a laundry list, but ticked off as priorities the tax credit, capital gains cut, spousal IRAs and estate-tax relief for family businesses and farms.
Many of the Senate Republicans most skeptical of cutting taxes sit on the Finance Committee.
by CNB