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Tax cut that's sure to die clears Congress

THE VOTING: In the House and Senate, approval of the $792-billion plan falls along party lines.

Congress gave its final approval Thursday to a Republican plan to lower income taxes.

The bill stands no chance of becoming law, because President Clinton has said he would veto it. But its merits and failings are sure to be hashed out time and again before next year's elections.

The House approved the measure Thursday afternoon, 221-206, with all but four Republicans voting for the bill and all but five Democrats voting against it. None of the breakaway voters were from Florida.

The Senate cleared the bill Thursday evening, 50-49. Four Republicans joined all the Democrats in opposition. Sen. Connie Mack, R-Fla., voted yes; Sen. Bob Graham, D-Fla., voted no. Sen. Michael Crapo, R-Idaho, a supporter of the bill, was absent because of his daughter's wedding.

Some moderate Republican senators who had threatened to vote against the measure, raising the possibility of its defeat, were appeased with changes made the night before the vote.

With the outcome a foregone conclusion, the day was spent in political positioning rather than serious debate. Both parties seem to feel they have the political advantage.

As the House was convening Thursday morning, President Clinton arrived at the Capitol for a Democratic pep rally in a Senate office building. He sought to make a distinction between Democrats and Republicans.

"What we say is: Deal with the big challenges first," Clinton said. "Deal with the aging of America. Save Social Security. Save Medicare. Add a prescription drug benefit. Add the preventive tests. And get America out of debt for the first time since 1835."

"What they have said," Clinton continued, speaking of Republicans, "is: Let's pass this big tax cut first, make everybody happy tomorrow and then we'll talk about the challenges."

Republicans held their own rally at the same time on the Capitol lawn. "We have a good deal for the American people," declared Speaker Dennis Hastert. "It's fair, responsible and balanced."

The purpose of the legislation, Hastert said, was so "the American people can decide how to spend their hard-earned dollars, and not the bureaucrats in Washington."

Rather than send the bill to the president at once, as is usually done when Congress completes work on legislation, Republican leaders put the tax bill on the shelf until September. The delay, they said, will enable them to tout the measure over the August recess, which begins this weekend, and will deny the president the spectacle of a veto ceremony while Congress is not in session.

The main elements of the bill would reduce income tax rates by 1 percentage point, lower the capital gains tax, give more favorable tax treatment to retirement savings, gradually abolish the inheritance tax, eventually end the so-called marriage penalty and the alternative minimum tax and give generous tax breaks to a range of commercial interests.

Calculations by Deloitte & Touche, the accounting firm, showed that a couple with two children under 17 and an income of $50,000, which is near the national median, would receive an annual tax cut of $265, less than enough for a movie a week in most cities.

A similar couple with an income of $200,000 would get a tax cut of $2,720.

The bill seems likely to be among the big measures, including Social Security, Medicare and spending bills, that will be part of negotiations between the president and Congress this fall. President Clinton has insisted that he cannot accept tax cuts of more than $300-billion over the next 10 years.

At $792-billion over 10 years, the tax reduction approved by Congress Thursday is the biggest since 1981. It was put together in slapdash fashion, the details not really mattering since everyone knew it was not going to become law.

When the bill's drafters, freed from the constraints of reality, determined that all the tax cuts they had put into the measure would exceed their target of $792-billion, they simply ended the rate reductions and many other cuts in 2008 instead of 2009, as had been planned.

Not taking into account the 2008 end of the provisions, the Treasury Department estimated Thursday that the most affluent 10 percent of taxpayers, those with incomes above about $90,000 a year, would receive about 60 percent of the tax cuts.

GOP tax cuts: the story so far

INCOME TAX _ COST: $402-billion

Trim each income tax rate by 1 percentage point; families in the lowest bracket would get a 7% break; ease "marriage penalty."

CAPITAL GAINS _ COST: $32-million

Reduce individual rates for most investments held at least a year from 20% to 18%; from 10% to 8% for those in the lowest tax rate.


100% tax deduction for those paying more than 50% of their health insurance premium; exemption for those caring for elderly relative at home; raise ceilings of Education Savings Accounts.

ESTATE TAX _ COST: $32-billion

Phase out over 10 years

RETIREMENT _ COST: $30-billion

Increase IRA contribution limits; boost 401k contribution limits; increase pension portability

URBAN PROBLEMS _ COST: Up to $2-billion

Create 20 renewal communities with tax breaks for businesses that create jobs

CORPORATE _ COST: Over $50-billion

Extend tax credits for welfare-to-work, research and development, alternative energy; tax breaks for nuclear power plant cleanups, tax break for overseas sale of military equipment.

SOURCES: Associated Press, Reuters, Knight Ridder Tribune Photo Service

Research / JUDY TREIBLE; Graphic / T. TSO / KRT