Clinton to Propose Tax Breaks to Aid Domestic Agenda

In his State of the Union address tonight, President Clinton will propose achieving most of his social goals, including school construction and long-term care for the elderly, through targeted tax breaks rather than the traditional Democratic reliance on spending programs.

Driving the strategy is Clinton’s extraordinary predicament: delivering his State of the Union address even as his congressional adversaries seek to expel him from office over the Monica S. Lewinsky scandal. The Republicans, who control Congress, long have favored tax breaks over spending programs as the means of achieving social goals.

As important, his approach reflects the reality that even the dramatic emergence of budget surpluses last year leaves him little room to maneuver because of his promise to preserve the surpluses until the financial future of Social Security is guaranteed.

More broadly, Clinton also is laying the groundwork for opposing the large, across-the-board tax cuts that congressional Republicans already have begun proposing, using the money instead to shore up Social Security.

Clinton will address a joint session of Congress at 6 p.m. PST, hours after the Senate listens to White House lawyers begin presenting their defense against the House-passed articles of impeachment.

For pure theater, the circumstances of Clinton’s speech arguably will exceed even those of his 1998 State of the Union address, which he delivered days after the Lewinsky scandal became public knowledge.

Clinton delivered his speech without so much as a reference to the gathering scandal. He is expected to pursue the same strategy this year.

White House spokesman Joe Lockhart told reporters Monday that, despite the pressures of his impeachment by the House and his trial in the Senate, Clinton remains determined to press ahead with his policy agenda.

“In fact, if you look from a purely policy point of view, this speech is probably as ambitious as the very first one he gave,” Lockhart said.

However, Clinton’s pledge to preserve the budget surplus until there is a long-term plan for Social Security means that he cannot raid that money for favored tax breaks or spending programs.

“Since he himself has said to Congress, ‘You can’t use the surplus until you save Social Security,’ he doesn’t want to open that Pandora’s box and then have Republicans start proposing ways to use the surplus,” said Bruce Bartlett, a senior fellow at the National Center for Policy Analysis, a conservative think tank.

GOP Seeks Major Tax Break

Republicans are eyeing the surplus as a means to pay for a major middle-class tax break. Over the weekend, Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said that, of the $700 billion in surpluses that he estimated would accumulate over the next decade, about $600 billion should be given back to taxpayers--an income tax cut of as much as 15% by the end of the decade.

“Social Security versus tax cuts will be the debate . . ,” Bartlett said. “The Republicans are under a lot of pressure to produce something and tax cuts have always been the glue that holds the Republican coalition together. The factions may not agree on the specific tax cut but they can agree that tax cuts are central to Republican politics.”

White House officials are well aware of where Republicans are headed.

“We have to be able to win the bigger-picture argument that it would be irresponsible to move any tax cut without moving Social Security at the same time,” said a senior administration official who asked not to be identified. “They have to have a plan for resolving Social Security before a tax cut.”

In the meantime, Clinton is pursuing the rest of his social program in miniature by proposing an array of relatively small but popular tax breaks that Republicans will find hard to oppose.

“Many of the social initiatives to support the family and health care would be dead on arrival if Clinton proposed them as spending programs,” said Clint Stretch, a managing partner at Deloitte & Touche, a leading accounting and consulting firm.

“If he said, ‘Let the Health and Human Services Department write a $1,000 check to every family member who provides long-term care to a family member,’ they would have laughed him out of town. But if the IRS writes the check, everybody says it’s a good idea.”

President’s Tax Proposals

Among Clinton’s new tax proposals:

* A $1,000 credit for taxpayers who care for a disabled parent or child in their homes.

* Credits to help the disabled go back to work by offsetting the cost of special transportation, work stations and the like.

* A $500 credit for mothers who stay at home with their infant children.

Clinton will also revive several of his tax cut proposals from last year that failed to win congressional approval.

In this category are tax incentives to purchasers of school construction bonds. The tax breaks would allow school districts to sell bonds carrying lower interest rates than would otherwise be the case.

Clinton also would expand the child-care tax credit for middle-income families and increase the credits available to companies that provide child-care services.

Finally, he is expected again to seek tax incentives to stimulate more energy-efficient vehicles and buildings.

Using the tax code to promote his social goals is an approach that Clinton learned after Congress, then controlled by Democrats, defeated the direct spending programs he included in his first budget in 1993.

Times staff writer Robert A. Rosenblatt contributed to this story.

To watch live video coverage of the State of the Union address you can go to The Times’ Web site: https://www.latimes.com/union

* Speech begins at 6 p.m. PST: The State of the Union will be carried live by the major networks and on the Web at https://www.latimes.com/union