Clinton Rejects Casino Tax Hike for Welfare Plan

President Clinton has ruled out tax increases to pay for his welfare reform plan, and has approved a narrower $9.5-billion program focused on his core campaign promise of requiring work after two years on the rolls, senior Administration officials said Monday.

The decision means that the Administration will disappoint liberals by proposing only modest expansions in child-care programs for the working poor.

But it will allow Clinton to avoid the difficult fight over taxing gambling revenues, which would have been required to pay for the larger plan, which had an estimated cost of $13 billion to $16 billion over four years.

“We are focused entirely on the core of what he promised during the campaign,” said one official.

By rejecting the casino tax, Clinton has assured that the plan will be funded only with budget cuts. After earlier criticism that proposed cuts focused too heavily on the poor, the Administration is now also targeting what one official called “welfare for the wealthy,” including some farm support payments.

Clinton’s decision will not affect the welfare plan’s central elements: efforts to increase collection of child support payments and a requirement that welfare recipients work after two years on the rolls, either in private-sector jobs or in public service jobs if no private jobs are available. Under the plan Clinton supports, the work requirement will be phased in, beginning with recipients born after 1971.

But the decision to reject taxes means the Administration will cut back on other elements of the plan, including state demonstrations of some reform experiments and a planned expansion of child-care assistance for the working poor. The plan will still provide child care for welfare recipients undertaking training or work.

There was clearly division in the ranks over the decision. Walter Broadnax, the deputy secretary of health and human services, said: “It is going to be a less robust plan, and we’re going to be losing a part that is clearly important if we’re going to stablize the working poor and keep them from going on welfare.”

Broadnax said he hoped more funding would be found from some other source, saying the measure is “extremely important” to welfare reform.

The Administration is expected to submit its long-delayed welfare reform proposal to Congress some time next month. Only a handful of significant decisions remains, including whether to permit states to deny additional benefits to women who have children while already on the welfare rolls.

Advocates of expanded child care immediately charged that rolling back those provisions could undermine the overall reform effort. “If correct, leaving child care out sets poor women up for a fall,” said Rep. Ron Wyden (D-Ore.). “What we heard again and again in our hearings is that women go out into the private sector, begin to make headway, and if child care is not there, they slip back into welfare.”

Only a few weeks ago, in a final report prepared for the President, the task force had argued that expanding child-care assistance was a critical element of welfare reform.

“The key missing component for making work pay is affordable, accessible child care,” the task force wrote. “In order for families, especially single-parent families, to be able to work or prepare themselves for work, they need dependable care for their children.”

On the other hand, some welfare reform advocates have argued recently that the best way to pass the plan is to strip it down to its essentials.

The rejection of the casino tax represents a triumph for those inside the Administration who felt that Congress would resist any taxes to fund welfare reform, particularly one targeted at the powerful gambling industry. But it is bound to disappoint liberals who would have preferred the Administration impose a tax rather than cut other programs for the poor.

“While the casino lobby represents a narrow interest, it is extremely politically powerful in particular states,” said Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a liberal think-tank based in Washington. “By contrast, (the poor) don’t make campaign contributions and the people who argue on their behalf tend to be church groups and religious organizations that don’t have the raw political muscle that well-heeled special-interest groups that make large contributions have.”

The Administration hopes to mute such criticism by expanding the targets of the budget cuts to programs that benefit the wealthy. In recent weeks, Administration officials have been combing through a report by Robert J. Shapiro, vice president of the Progressive Policy Institute, a centrist Democratic think-tank, identifying subsidies for the affluent and corporations.

At least two subsidies Shapiro fingered are likely to be included in the final welfare reform funding package, officials said. One is a proposal to cut back on farm subsidy payments to wealthy part-time farmers who receive more than $100,000 annually in non-farm income; another would deny favorable tax treatment to certain kinds of annuities. But officials said the Administration also is committed to pressing ahead with its most controversial budget cut: A plan to extend the period before legal immigrants can become eligible for Supplemental Security Income benefits, which aid the disabled, indigent and the elderly who do not qualify for Social Security.

The Clinton plan will still double child-care spending over the next five years, adding another $1.5 billion in total. But it is a substantial cutback from the broader plan, which would have increased child care for the working poor by $3.5 billion over the next five years.

In addition, the rejection of casino taxes will also compel the Administration to scale back several reform experiments some officials had hoped to include in the final plan. Sources said that the Administration will roll back a planned test of child support assurance--a program to guarantee a minimum child support payment to all single parents. The program is favored by Health and Human Services Assistant Secretary David T. Ellwood, a co-chairman of the task force.

Also to be reduced are experiments on letting welfare recipients keep more part-time earnings and incentives for recipients to accumulate assets toward a college education or starting a business. And rather than requiring states to expand welfare assistance to two-parent families, the plan now would leave them the option of doing so.

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