By Larry Jones

By a vote of 223 to 208 along party lines on July 22, the House passed a proposal that would provide $792 billion in tax cuts over the next decade. Key components of the bill—a 10 percent across-the-board cut in income tax rates, a cut in the capital gains tax, a reduction in the so called marriage penalty and the elimination of the estate tax—were retained but implementation would be delayed or phased-in over a longer period in order to trim the cost of the bill. Six Democrats joined most Republicans in voting for the proposal, while four Republicans joined most Democrats in voting against it. During floor considerations, Democrats offered a $250 billion alternative tax cut proposal which was voted down by a vote of 173- 258. President Clinton, who favors a $250 billion targeted tax cut, restated his pledge to veto the House tax bill on July 22. He said "if the Republicans send me a plan that undermines our ability to reform Social Security and Medicare and abandons the fiscal discipline that has helped to fuel our economic growth, I will send it straight back with a veto."

The House bill was adopted with the support of moderate Republicans after they threaten to oppose an earlier $864 billion proposal approved on July 14 by the House Ways and Means Committee. They opposed the measure because it exceeded the limit set for tax cuts in the 1997 Balanced Budget Act and because it did not set aside an adequate amount of funds to reduce the national debt and fund key domestic programs. To address these concerns, House Ways and Means Committee Chairman Bill Archer (TX) amended the committee’s bill and offered a substitute for floor consideration. In the substitute the amount of the tax cut was reduced by $72 billion and language was added to ensure relief in the national debt. Under Archer’s amendment, the 10 percent across-the-board reduction in the income tax rates would be phased-in only if the national debt and the federal cost of borrowing show a continuous decline.

The Senate Finance Committee approved a $792 billion tax cut proposal on July 21 by a vote of 13-7 mostly along party lines. All Republicans and two Democrats voted in favor of the bill, which differs significantly from the House version. The key differences are the Senate bill would reduce the lowest 15 percent tax rate to 14 percent, eliminate the marriage penalty, reduce rather than eliminate the estate tax, and include no capital gains tax cut. The Senate is scheduled to begin floor debate on July 28. The President has also pledged to veto the Senate version.

In a July 13 letter to members of the House Ways and Means Committee and Senate Finance Committee, the Conference urged that a number of provisions be included in the tax bill. While both versions of the bill include some of the programs requested by the Conference such as low income housing tax credits, welfare-to-work tax credits, worker opportunity tax credits and brownfield tax credits, they do not include a number of key city priorities requested to assist cities in revitalizing distressed communities. These include the commercial revitalization tax credits, new market tax incentives, school construction tax credits, Better America Bonds, a one-year extension of the welfare-to-work program and funding to support the existing 20 Empowerment Zones and 15 Strategic Planning Communities.