[Congressional Record Volume 143, Number 97 (Thursday, July 10, 1997)]
[House]
[Pages H5128-H5129]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                TAX CUTS

  (Mr. SMITH of Michigan asked and was given permission to address the 
House for 1 minute and to revise and extend his remarks and include 
extraneous material.)
  Mr. SMITH of Michigan. Mr. Speaker, I think it is very disingenuous 
when our friends from the other side of the aisle say they want tax 
cuts. First of all, I think Republicans are making a mistake because 
what is happening now is the liberals spend 10 percent of their time on 
developing policy and 90 percent on spinning it. Republicans spend 90 
percent on developing policy but only spend 10 percent on spinning it. 
So there is a great deal of misunderstanding out there.
  Mr. Speaker, I will include as part of my remarks Jim Glassman's 
article in yesterday's Washington Post that spells out some of the 
differences between the Republicans and the Democrats.
  I would like to simply conclude that we have a tax system that 
punishes our businesses to the extent that they have to move out of 
this country. The cost of labor is 10 to 12 percent of the cost of 
producing an item. The taxes run up to 39 percent in this country. We 
need to be looking at the kind of tax policy that is going to expand 
the economy.

                [From the Washington Post, July 8, 1997]

                          Then There's Plan B

                         (By James K. Glassman)

       The new Labor government of Tony Blair last week passed its 
     first budget, and the main feature was a tax cut that gives 
     British businesses the lowest rates in the industrialized 
     West. ``The central purpose,'' said Chancellor of the 
     Exchequer Gordon Brown, ``is to insure that Britain is 
     equipped to rise to the challenge of the new and fast-
     changing global economy.''
       Contrast those sophisticated sentiments with what President 
     Clinton was doing at the same time in Washington--making 
     noises that he'll veto an extremely modest tax-relief bill if 
     it doesn't meet his own specifications. Clinton may be just 
     bluffing, but he's taking delight in fanning the flames of 
     class warfare just as Britain's Socialists are eschewing such 
     nonsense.
       But what if the president does veto the bill that emerges 
     from a House-Senate conference? Then, Republican leaders--
     notably, Speaker Newt Gingrich--should tell him, in the 
     immortal words of Clint Eastwood, ``Go ahead. Make my day.''
       They should make it clear that if Clinton rejects the puny 
     cuts in the current bills (amounting to one percent of 
     projected tax revenues over the next five years), then the 
     budget deal is off forever, and Plan B will swing into 
     effect. I'll describe Plan B below, but, first, let's look at 
     what divides the antagonists:
       Child credit. Under GOP bills, families that earn less than 
     $110,000 will be able to knock $400 to $500 per child off 
     their final tax bills. The median two-earner family (making 
     $53,000 a year) with three kids would see taxes fall from 
     $5,100 to $3,600--a huge cut. Clinton wants the credit to 
     apply as well to many families that don't make enough to pay 
     income taxes, and he starts phasing out the break for couples 
     making $60,000.
       Capital gains. Under the House and Senate bills, the top 
     rate would fall from 28 percent to 20 percent on the sale of 
     assets such as stocks and bonds. Clinton wants a 30 percent 
     ``exclusion'' from ordinary income, which means that, for top 
     earners, the rate would fall to just 27.7 percent--a nose-
     thumbing mockery. The House wouldn't tax profits boosted by 
     inflation.
       Democratic critics of the GOP plan say that it reduces 
     taxes more for those with high incomes than those with low. 
     Maybe so, but it's nearly impossible for a cut in income 
     taxes to do anything else. That's because low-income 
     Americans pay little or nothing.
       The figures are astonishing. According to the IRS, the top 
     5 percent of earners pay 47 percent of the nation's income 
     taxes. The top 10 percent pay 59 percent, and the bottom 50 
     percent of earners pay only a 5 percent share.
       Apparently unaware of such numbers, the Democratic Policy 
     Committee recently sent an outraged fax to talk-radio hosts 
     around the country: ``Under the current GOP proposals, the 
     top 1 percent of Americans would receive more benefits than 
     the combined bottom 60 percent in tax cuts.''
       But the IRS reports that the top one percent of Americans 
     pay 29 percent of the nation's income tax bill; the bottom 60 
     percent pay just 9 percent. So, to be fair, the top one 
     percent should get triple the cuts of the bottom 60 percent.
       Teh resourceful administration has a way to give tax cuts 
     to people who don't owe taxes. It wants to send checks--
     welfare benefits to inspire breeding--to millions of families 
     that don't qualify for tax breaks because their income tax 
     bills amount to zero.
       Will Republican leaders compromise with the White House 
     before going to conference? If they do, they should be 
     laughed out of office. Economic consultant Jude Wanniski told 
     clients last week that the president's ``tax proposal is 
     clearly at the level of fun and games, with Clinton trying to 
     steal Newt's underwear after talking him out of his outer 
     garments in the 104th Congress.''
       What happens if Gingrich stands firm and Clinton issues his 
     veto? That triggers what I call Plan B:

[[Page H5129]]

       (1) The budget deal negotiated in good faith in May is null 
     and void. (2) In its place, Congress passes a stripped-down 
     spending plan for the federal government with none of the 
     president's $30 billion-plus in new and expanded programs. 
     (3) Congress passes a back-up resolution that sets spending 
     at 1997 levels for departments covered by any appropriations 
     bills the president vetoes.
       Finally, (4) Medicare won't be touched. Instead, reductions 
     needed for a balanced budget by 2002--or, preferably, 
     sooner--will come from cuts in spending growth and 
     postponement of tax relief. Congress will then get down to 
     the real work of reforming entitlements and the tax code, not 
     the silly hodgepodge of the current budget.
       Tax relief, 1997-style, wouldn't be a great loss. (The lack 
     of capital gains cuts could trigger a stock market crash, but 
     shares would likely recover.) Indeed, in many ways, the tax 
     bills are abominable. They further complicate the code and 
     include Clinton's latest steps to nationalize health care and 
     establish new education subsidies for a favored few, plus 
     breaks for consumers of hard apple cider, for speedboaters, 
     Oklahoma oil-well owners, sellers of archery products and 
     whaling captains.
       These payoffs to interest groups--including the religious 
     right, which is backing the child credits--are just business 
     as usual for tax writers. They're also a serious detour from 
     the road to a far more sensible goal, a flat-rate income tax, 
     which, according to a poll last month for Fox News, has the 
     support of 57 percent of Americans and the opposition of just 
     27 percent.
       As it stands, the GOP tax plan is barely acceptable. If the 
     president insists on any changes, he'll tip the balance. Like 
     Eastwood, I'm half-hoping he does.

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