House OKs $80-Billion GOP Plan to Cut Taxes

The House approved a five-year, $80-billion tax cut Saturday that President Clinton has threatened to veto, signaling an election year confrontation between parties about how to use the first federal budget surplus in a generation.

The Republican-backed bill, which was approved on a largely party-line vote of 229-195, would use some of the emerging budget surplus to ease the tax burden on married couples, reduce inheritance taxes and provide an assortment of other popular tax breaks. Only 11 Republicans broke ranks to vote against the bill; 19 Democrats--including five from California--split with their party leadership to vote for it.

“Budget surpluses don’t belong to the government,” said Rep. Jim Bunning (R-Ky.), who is running for the Senate this fall. “They belong to the American people. We should give some of the money back to the people.”

But Clinton--and most Democrats--fought the bill because they oppose dipping into the surplus until after Congress has decided how to put Social Security on a sound fiscal footing in time for the wave of retiring baby boomers.

“First things first,” Clinton said in a statement issued Saturday while he was on a Democratic fund-raising tour in Southern California. “I will insist that we reserve the entire surplus until we have seized this historic opportunity to save Social Security and veto any bill that doesn’t meet that principle.”

The bill, in fact, may never even make it to Clinton for a veto, because the tax cut push could die in the Senate. There, cutting taxes faces higher procedural hurdles and more resistance from moderate Republicans than in the House.

Still, the conflict between the House Republicans and Clinton over the measure is sure to surface on the campaign trail this fall. And the fact that most Democrats stuck with Clinton and opposed the bill was an important show of strength for the beleaguered president, amid speculation that his influence among congressional Democrats would wane as a result of the Monica S. Lewinsky scandal.

House Republicans deliberately wrote the bill to attract Democratic votes by targeting benefits at middle-income families and including a proposal to ease the “marriage penalty,” the tax-code quirk that forces many people to pay more in taxes after they are wed.

In the weeks leading up to Saturday’s vote, House Democratic leaders had been concerned that some of their rank-and-file members would defect and support the bill because they were uncertain that Clinton would follow through on his veto threats.

White House officials worked hard to provide assurances that Clinton would not waver, personally traveling to Capitol Hill to repeat that message. And on Thursday, Vice President Al Gore joined Democrats at a rally on the Capitol steps to denounce the GOP tax cut and restate the principle of “Social Security first.”

When the final roll was called, Democratic defections were limited. Within the California delegation, the five Democrats voting for the bill were Reps. Lois Capps of Santa Barbara, Gary A. Condit of Ceres, Jane Harman of Torrance, Brad Sherman of Sherman Oaks and Ellen O. Tauscher of Pleasanton.

Capps, Sherman and Tauscher face potentially tough reelection battles, while Condit and Harman (who is not seeking reelection) frequently side with the GOP on economic issues.

No California Republicans voted against the bill.

The legislation reflects the views of key GOP constituencies, such as conservative groups (who have pushed relief from the marriage penalty), the small-business lobby (which has clamored for estate tax relief to preserve the value of family businesses passed from one generation to the next) and farmers, who in many parts of the country are suffering from a collapse of commodity prices.

Among the key provisions, the bill would:

* Reduce the marriage penalty by increasing the standard deduction for couples filing jointly, providing an average tax cut of $243 per couple.

* Exempt from taxation the first $200 that individuals and the first $400 that married couples earn in interest and dividends.

* Accelerate a scheduled cut in the estate tax by moving from 2006 to 1999 the effective date for a plan to increase the size of estates that are tax-exempt to $1 million, up from $625,000 now.

* Permanently allow farmers to use “income averaging,” a technique for calculating income tax that allows them to compensate for big swings in income from year to year.

House debate on the bill took place in an unusual Saturday session, scheduled in part because congressional leaders are struggling to finish legislative business in time to adjourn for the year in early October.

House Speaker Newt Gingrich (R-Ga.) pointed to the weekend session to rebut Clinton’s claim Friday that this is a do-nothing Congress.

“We are not in California attending a fund-raiser,” Gingrich said on the House floor. “We are here in Washington, working on the people’s business.”

The day’s debate allowed both parties to don their favorite election year identities: Republicans as the premier tax cutters, Democrats as the great defenders of Social Security.

Democrats’ line of argument hinged in part on an obscure accounting procedure. Although the Congressional Budget Office projects a $1.6-trillion budget surplus over the next 10 years, most of that will be generated by excess Social Security payroll taxes. So, Democrats argued, dipping into the surplus amounts to a Republican raid on the Social Security trust fund.

“They are rushing to spend the surplus that doesn’t even exist,” said House Minority Whip David E. Bonior (D-Mich.). “They are handing it out in an election year giveaway.”

Republicans countered that their bill would use only 10% of the projected surplus for tax cuts, which would not endanger Social Security.

They argued that even Clinton has proposed dipping into the surplus, not for tax cuts but for government spending. He has requested $13 billion in supplemental funding for U.S. troops in Bosnia, disaster relief and other money the administration says is emergency spending, and thus does not need to be offset with comparable spending cuts.

“Liberal Democrats say, if it’s government spending, take it out of the surplus; if it’s for the taxpayers, that would be dangerous,” Gingrich said.

Although dissenters were not heard during floor debate, one Republican in an interview acknowledged the pinch of the Democrats’ arguments.

“I think it is absolutely dumb to ask Republicans to choose between Social Security and tax cuts in an election year,” said Rep. Mark W. Neumann (R-Wis.), who is running for the Senate in the fall. He voted against the tax cut.

The outlook for the bill is cloudy in the Senate, largely because budget rules there require a 60-vote majority to pass any tax cut that dips into the surplus. GOP strategists admit that, with only 55 Republicans in the Senate--some of whom are not so eager to cut taxes--the bill faces an uphill fight.

Gingrich practically dared Senate Democrats--especially those such as Barbara Boxer of California, who is up for reelection this year--to oppose the tax cut.

“If Barbara Boxer would like to run for reelection as a high-tax, big-spending liberal blocking the people of California from tax relief, that’s a calculation [she] will have to make,” Gingrich said.