Republicans Are Agreeing On A Tax-Cutting Package The President Can Sign

Mike Godfrey, Tax-news.com, Washington

25 October 2000

Congressional majority leaders agreed on Tuesday on a bill that would put the Administration's new Foreign Sales Corporation into law by the 1st November deadline set by the World Trade Organisation. The deadline was originally 1st October, but with the agreement of the EU (which brought the case against the US) it was pushed out one month. Not that the Europeans have agreed the revised package which was hastily cobbled together after the WTO rejected the previous compromise - but if the WTO accepts it, there is a chance the EU will refrain from a further appeal.

With only days of legislative time left in the 106th Congress, the FSC legislation is one of the highest priorities. The Republican meeting also addressed the question of which of its tax-cutting bills (mostly vetoed by the President) stood the best chance of getting through before the end of the Congress.

The list they have come up with includes:

• Legislation increasing the annual contribution limits for individual retirement accounts from $2,000 to $5,000 and for 401(k) plans from $10,500 to $15,000. A special IRA 'catch-up' limit of $7,500 would apply to people over 50, although the legislators were having problems adjusting a provision that has drawn Clinton administration objections because it could mean greater pension benefits for a company's upper management at the expense of rank-and-file workers;
• An anti-poverty bill backed by the President that would expand empowerment zones where special tax and regulatory rules apply, spur capital investment in poor urban and rural areas, raise limits on low-income housing credits and provide tax incentives for Amtrak high-speed rail;
  
• Several business tax breaks to offset the proposed $1 increase over two years in the $5.15-an-hour minimum wage, including increased business meal tax deductions and an increase in expense write-offs for business equipment;
  
• A tax deduction of between $5,000 and $10,000 for the costs of long-term health care, a full deduction for people who pay 50 percent or more of their own health insurance premiums and a $10,000 deduction for the costs of adopting a child.
  

House Ways and Means Committee Chairman Bill Archer (Rep - Texas) opposes the creation of numerous new tax credits, but the Amtrak provisions are a top priority for Senate Finance Committee Chairman William Roth (Rep - Del), who is facing a difficult re-election battle against Delaware Gov. Thomas Carper, a Democrat.

House Majority Leader Dick Armey (Rep - Texas) said that the meeting had brought agreement very close on most parts of the package, although only the FSC provisions were definitely settled. Unlike earlier bills, he said, the package was designed to gain President Clinton's signature instead of a veto.

'We're trying to make good law and we're expecting it to be signed,' said Armey. The total cost of the package is put at $250bn over the next 10 years (less than current estimates of this year's surplus, which keeps ballooning upwards).

Although Democrats and the Administration have been against most previous GOP proposals, Treasury Secretary Lawrence Summers told reporters earlier on Tuesday that the ingredients were on the table to produce a deal on moderate tax relief this year, despite the administration's rejection of previous GOP bills repealing the estate tax and easing the 'marriage penalty' tax on two-income couples.

'There are very important priorities that we can meet through the tax system this year that everybody agrees on,' said Larry Summers. 'There is a clear agenda and a clear willingness to cooperate to get it done.'

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