With an Eye on Budget Surplus, the GOP Offers Up Dueling Plans to Trim Taxes

The chief tax writer for the House of Representatives on Saturday called for a 10% across-the-board income tax rate cut, ratcheting up debate within the GOP’s own ranks--and between Congress and the White House--about what kind of tax relief will eventually be provided, if any.

The proposal by House Ways and Means Committee Chairman Bill Archer (R-Texas) would give taxpayers a bigger tax cut than the measure outlined a day earlier by Senate Finance Chairman William V. Roth Jr. (R-Del.), but it is likely to run into even more political resistance. A White House spokesman expressed concerns Saturday about the estimated $800-billion cost of both proposals.

With a federal budget surplus projected over the next decade, just about everybody on Capitol Hill has a proposal for easing the tax burden--from eliminating the so-called marriage penalty to reducing the tax on beer to abolishing the federal income tax altogether.

In his radio address Saturday, President Clinton reiterated that his priority is shoring up Social Security and Medicare, although he has proposed a $250-billion, 10-year tax cut package that would provide tax subsidies for retirement savings and day-care expenses rather than broad-based tax cuts.

“It would be wrong to spend our hard-earned surplus on tax cuts before we first have honored our obligations to our seniors and to all our families in the 21st century,” Clinton said. Clinton will meet Monday with congressional leaders from both parties to discuss Medicare.

But Archer said there is a surplus only because taxpayers have been paying too much. “If we don’t cut taxes now and the money stays in Washington, the politicians surely will spend it,” he said.

Under Archer’s tax cut plan, which would be phased in over a decade, a family of four with an annual taxable income of $55,705 would save $1,000, an aide to the congressman said. A single taxpayer earning $25,000 would get a tax break of $380.

Roth, who outlined his plan in Saturday’s GOP radio address, said his proposal to lower the 15% tax bracket to 14%, would save a middle-income family of four $450 a year.

“The real question the Republicans are going to have to resolve is whether they’re going to put together a plan that draws the president’s fire or a plan that can be used to forge a compromise,” said Robert Reischauer, senior fellow at the Brookings Institution.

Rep. Charles B. Rangel of New York, the ranking Democrat on the Ways and Means Committee, called Archer’s plan “more a set of talking points than a real tax plan, aimed at the wealthy Republican base. It has no chance of becoming law.”

Rangel asserted that the average annual tax cut for most households would, once fully phased in over 10 years, be about $100. By contrast, he said, the wealthiest 1% of taxpayers, those making more than $300,000 per year, would receive an average tax cut of about $20,000.

Archer chairs the panel that will get the first crack at drafting a tax relief package. He hopes to complete work by Friday.

He is the second key House member to propose the 10% cut in individual income tax rates. House Budget Chairman John R. Kasich (R-Ohio), a presidential hopeful, also favors the 10% cut.

House Republicans concede that any tax cut will naturally benefit those who pay the most in taxes, but they hope to soften the political effect by spreading breaks to all taxpayers.

Archer released a chart showing that 8% of the population--earning more than $100,000 a year--pay 62% of income taxes.

But he also wrapped his $400-million income tax cut in a larger $864-billion tax relief package that includes reducing the top capital gains tax rate on investment profits from 20% to 15%, phasing out estate taxes and reducing the marriage tax penalty, which, Republicans argue, will benefit the middle class.

Roth’s $792-billion plan is seen as more palatable to Democrats because it does not include a capital gains tax cut or a repeal of inheritance taxes.

“A 10% cut is very fair, in that everybody gets the same, but in terms of dollars, that’s going to be more dollars for people at the top income levels,” an aide to Roth said. “Those are the people who pay the most in taxes. . . . What we’re trying to do is come up with a tax cut that can receive broad bipartisan support.”

In the GOP radio address, Roth said: “In offering this historic tax relief, we will not fail to meet the challenges to important programs like Medicare and Social Security . . . but the rest of the surplus--rather than go to create more government in Washington--needs to go home.”