House GOP Tax Bill Encourages Firms to Utilize Pension Money

From Associated Press

House Republicans began writing a wide-ranging tax bill Monday that would cost the working poor money and encourage corporations to withdraw billions of dollars from pension funds.

Their goal is to fold the legislation, along with $270 billion in Medicare savings and the $245-billion tax reduction for families and businesses called for in the GOP's "contract with America," into a giant tax and spending bill later this fall.

Many provisions--such as extending the tax credit for corporate research and development--are expected to receive the 37-member Ways and Means Committee's bipartisan backing at bill-writing sessions scheduled through Wednesday. Overall, the bill would trim the budget deficit by $40.2 billion through 2002.

Democrats criticized Republicans on their proposal to slice $23.3 billion from the $153 billion that the earned-income tax credit is projected to cost over the next seven years. And they accused Republicans of unseemly haste in moving the complex measure.

"I think their strategy is marvelous: Don't let anyone know what's in the bill and get it through real fast before anybody knows what's going on," said Rep. Sam Gibbons of Florida, the committee's senior Democrat.

The earned-income tax credit, designed to help low-income workers stay off welfare, ranges from just a few dollars a year to a maximum of $3,564. It can be claimed annually as part of recipients' tax refunds or it can be received as supplements to their paychecks.

In addition to cutting such credits, the GOP tax plan also would raise $10.5 billion over seven years by letting corporations withdraw "excess money" from their pension funds. Once the money is withdrawn, a practice now prohibited unless the money is used for retiree health benefits, it would be subject to the corporate income tax.

Corporations argue the excess money is better spent helping the businesses expand than idling in a pension fund. But critics, including the federal Pension Benefit Guaranty Corp., the AFL-CIO and the American Assn. of Retired Persons, say the bill's definition of excess is so lax it would permit withdrawals endangering the pension plans' beneficiaries.

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