[Public Papers of the Presidents of the United States: George H. W. Bush (1992-1993, Book II)]
[November 4, 1992]
[Pages 2154-2155]
[From the U.S. Government Publishing Office www.gpo.gov]



Memorandum of Disapproval for the Revenue Act of 1992
November 4, 1992

    I am withholding my approval of H.R. 11, the ``Revenue Act of 
1992,'' because it includes numerous tax increases, violates fiscal 
discipline, and would destroy jobs and undermine small business. The 
urban aid provisions that were once the centerpiece of the bill have 
been submerged by billions of dollars in giveaways to special interests.
    My Administration's agenda for tax legislation has been clear from 
the outset: a focused measure to encourage economic growth, address the 
needs of economically deprived urban and rural areas, and make a limited 
number of significant and broadly supported changes in the tax law. 
While certain provisions in H.R. 11 meet these objectives, the bill as a 
whole does not. Its 647 pages contain more than 600 provisions, require 
more than 25 new studies or reports, set up 4 new commissions and 
advisory groups, and mandate numerous new demonstration and pilot 
projects. Most of these provisions are unrelated to the true needs of 
the economy and the American people.
    The original focus of the bill--to help revitalize America's inner 
cities--has been lost in a blizzard of special interest pleadings. In 
fact, the enterprise zones provisions in H.R. 11 account for less than 
10 percent of the revenue cost of the measure. While the enterprise 
zones provisions are a step in the right direction, more than 75 percent 
of all seriously distressed communities are left out in the cold. In 
addition, the capital incentives are far too limited. My proposal would 
grant eligibility to all areas that meet objective criteria. My proposal 
also would provide a complete exclusion from capital gains taxation for 
all investors in enterprise zone businesses, including gains from 
goodwill, the principal asset created by small business.
    The bill's other major urban aid provision, which authorizes 
assistance to distressed communities, is also inadequate. My ``Weed and 
Seed'' proposal, currently being implemented on a pilot basis, 
coordinates Federal assistance to drug- and crime-ridden neighborhoods 
and targets much of the assistance to enterprise zone communities. H.R. 
11 falls short of my plan. The bill adopts a business-as-usual approach 
to dispensing Federal assistance. It ignores the Administration's 
bottom-up method of combining strong law enforcement with resources to 
assist residents and neighborhoods in attaining economic self-
sufficiency. Finally, communities currently benefitting from the pilot 
program could be denied continued funding because they may not be 
located in enterprise zones. It is regrettable that the Congress has not 
included a ``Weed and Seed'' program in a bill that I can sign.

[[Page 2155]]

    The revenue provisions of H.R. 11 include some of my proposals, but 
omit three major components of my economic growth agenda. These are my 
proposals to provide a credit for first-time homebuyers; capital gains 
tax relief for start-up businesses; and incentives for investment in 
capital equipment. On balance, the revenue provisions of H.R. 11 are 
unacceptable. They would:
    Raise $33 billion in new taxes over 5 years on a wide array 
            of American families, workers, and small businesses.
    Increase taxes on individuals, including middle-class 
            taxpayers, in numerous ways. For example, the bill limits 
            deductions for moving expenses and for losses resulting from 
            theft, fires, and natural disasters.
    Repeal the 100 percent estimated tax safe harbor for small 
            businesses. This would throw a monkey wrench into the 
            primary engine of job creation.
    Raise numerous taxes on large employers, which will slow the 
            recovery and undermine our competitive position in world 
            markets.
    Lose about $2.5 billion in revenue as a result of more than 
            50 special relief provisions for limited numbers of 
            taxpayers that have no policy justification.
    Impose needless and costly paperwork and recordkeeping 
            burdens on the private sector.
    H.R. 11 goes 180 degrees in the wrong direction in its treatment of 
expiring provisions of tax law. It would make permanent those expiring 
measures that are very costly and have negligible long-term benefits 
according to a broad range of government and private sector analysts. In 
contrast, the bill fails to make permanent the research and development 
tax credit and the deduction for 25 percent of health insurance premiums 
paid by self-employed individuals. It also fails to raise the health 
insurance deduction to 100 percent, as I have proposed.
    The bill's Medicare provisions move in the opposite direction from 
the consensus view that we need to contain rising health care costs. 
They would increase Medicare costs by an estimated $3 billion over 5 
years. For example, they invite a flood of costly lawsuits to challenge 
Medicare payments made as long as 6 years ago. These provisions would 
burden the courts and undermine consistent nationwide application of 
Medicare rules.
    Another costly provision of H.R. 11 would permanently divert income 
taxes from the general fund of the Treasury to the Railroad Pension 
Fund. According to the Railroad Retirement Board, by the year 2016 this 
taxpayer subsidy could add $13 billion to this single industry pension 
fund. The diversion would set a dangerous precedent for other industry 
pension plans that may seek Federal taxpayer support in the future.
    H.R. 11 abandons all pretense of fiscal discipline. It would 
increase the deficit in fiscal years 1994, 1995, and 1996. ``Mandatory'' 
spending would rise by more than $7 billion over 5 years--at a time of 
growing consensus that this portion of the budget must be brought under 
control.
    The bill also arbitrarily increases statutory spending limits to 
allow roughly $600 million in increased payments to Medicare contractors 
for administrative costs. To benefit these companies, the Senate voted 
by the narrowest possible margin to waive its own rule requiring 
compliance with legal spending limits. These limits on discretionary 
spending were agreed to by bipartisan majorities of both Houses of 
Congress. It is irresponsible to waive them to benefit one group of 
companies.
    I regret that my disapproval of H.R. 11 will prevent the enactment 
this year of many provisions that have my full support. However, the 
bill's benefits are overwhelmed by provisions that would endanger 
economic growth. I am therefore compelled to withhold my approval.

                                                             George Bush

The White House,
November 4, 1992.