    [Public Papers of the Presidents of the United States: William J. Clinton (1997, Book I)]
    [June 30, 1997]
    [Pages 842-846]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks on Proposed Tax Cut Legislation and an Exchange With Reporters
    June 30, 1997

        The President. Ladies and gentlemen, now that the two Houses of
    Congress have completed action on their tax plan, I would like to make
    some comments and offer my plan for what I think should be done with the
    tax portion of the balanced budget agreement.

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        By way of background, let me point out again, as I have said many
    times, I was determined to change the economic policy of the United
    States Government when I became President. We abandoned trickle-down and
    the big deficits and instead adopted an invest-and-grow strategy: reduce
    the deficit, invest in the education and skills of our people, and make
    sure we sold more American goods and services around the world. That has
    contributed, along with the ingenuity, hard work, and productivity of
    the American people, to the healthiest economy we've had in a
    generation.
        I want the balanced budget we ultimately pass to continue to
    reinforce that strategy and our values. The agreement that we signed
    with the Republican and Democratic leaders of Congress reflects the
    invest-and-grow strategy. It is in balance with our values of honoring
    work, strengthening families, and offering opportunity. It eliminates
    the deficit, it invests in education, it extends health care for more of
    our children while securing Medicare for our parents, and it provides
    for an affordable tax cut for the American people.
        America's families deserve a tax cut, and they deserve one that
    reflects their values. It is, after all, the energy and dedication of
    the American people that has produced our present prosperity, that has
    made it possible for us to balance the budget. The American people
    should receive a dividend from this prosperity because they have
    produced the strength that has enabled us to achieve it. The dividend
    should be reflected in policies that help them to strengthen their
    families and educate their children.
        Two different tax cut bills have passed the House and the Senate.
    The bills contain many good elements, but I do not believe they
    represent the best way to cut taxes, nor are they consistent with the
    balanced budget agreement. They are not close to the roughly $35 billion
    the agreement explicitly provides to help people provide for higher
    education costs; they do an inadequate job of opening the doors to
    college, therefore. They direct far too little relief to the middle
    class. They include time-bomb tax cuts that threaten to explode the
    deficit. They do not do enough to keep our economy going.
        Today, as lawmakers from both Houses prepare to begin final
    negotiations with our administration over the details of a tax cut, I
    offer my plan to cut taxes. My plan reflects America's values, helping
    families pay for college, raise their children, buy or sell a home, pay
    for health care. It honors the budget agreement. It is the right plan
    for America.
        This reflects the approach of Democratic alternatives that were
    offered in Congress, but it also reflects the priorities of the
    Republicans as well. The $85 billion tax cut I submit has five central
    elements.
        First, the tax cut plan will focus on education, our Nation's
    highest priority, with $35 billion in targeted tax cuts. To offer
    opportunity in the new and rapidly changing economy, we must make the
    13th and 14th years of education, the first 2 years of college, as
    universal as a high school diploma is today. To that end, my proposal
    will give young people a HOPE scholarship tax credit worth up to $1,500
    for the first 2 years of college. It gives further tax cuts to help pay
    for 4 years of college. It provides tax relief to pay for training and
    learning throughout a lifetime. It will allow parents to save in a tax-
    free IRA for their children's education, and it will use tax incentives
    to help communities rebuild and modernize their schools. Education is
    how we will meet the challenges of the 21st century, and the core of our
    tax cut must be to help families pay for education. The tax cuts can do
    for our children what the GI bill did for Americans a generation ago.
        Second, my plan gives families a $500 tax credit for every child
    under 17. This plan, unlike the tax cut proposals put forth by the
    congressional majority, would give working people who earn lower
    salaries the child tax credit as well. A rookie police officer or a
    starting teacher, a firefighter or a nurse who earns $22,000 deserves a
    child tax credit. They are some of our hardest pressed working people.
    They are paying taxes now, and I will fight to give them the same tax
    relief that other Americans would receive.
        Third, to honor our commitment to bipartisanship, the plan allows
    taxpayers to exclude 30 percent of their capital gains from taxation. It
    also gives a capital gains tax cut for buying and selling a home. The
    capital gains cut is targeted, more prudent, and less likely to explode
    the deficit in the years to come than the plan of the congressional
    majority.
        Fourth, my plan provides estate tax relief to help parents who want
    to pass small businesses and family farms on to their children.
        Fifth, the plan provides tax incentives to encourage businesses to
    hire people off welfare.

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    It will also provide tax cuts to businesses that clean up urban toxic
    waste sites known as brownfields and convert these sites to productive
    use. It will create 20 more empowerment zones to attract businesses into
    disadvantaged neighborhoods, and it includes tax incentives to revive
    our Nation's Capital.
        The brownfields and the empowerment zones were both mentioned in the
    budget agreement as items that the leaders would work hard to include in
    the final tax bill. It is now time for all the leaders who did the
    agreement to work together to achieve that. Only by bringing the spark
    of private enterprise into our inner cities will we truly break the
    cycle of poverty that holds too many of our people back.
        In addition, the Senate, by bipartisan agreement, departed from the
    budget agreement to support a 20 cents per pack tax on cigarettes. I
    will support this change. Unlike the Senate version, however, I believe
    these revenues should be used entirely in ways that focus on the needs
    of children and health care.
        This tax cut plan that I have just outlined embodies the best ideas
    offered by Democrats. It reflects many of the priorities of the
    Republicans, such as the capital gains cut. It is balanced. It is fair
    to the middle class. It will foster economic growth without hurting our
    vulnerable citizens. And it is consistent with the budget agreement. It
    is the right plan for America. And I will do my best and fight hard for
    it in the weeks to come.
        Q. What do you say to people who think you give more to the rich
    than the poor in this case?
        The President. Well, I would just--I would ask you to compare my
    plan with the Republican plan. Our plan gives the vast majority of aid
    to the middle class, the 60 percent in the middle, and much, much more
    than either the plan which passed the Senate or the plan which passed
    the House. The people who have more money pay more taxes, and if you
    have a capital gains tax cut or an estate tax cut of any kind, there
    will be significant benefits to people in upper income groups. But our
    plan targets hard the middle class as well as working people who make
    more modest incomes.
        And Secretary Rubin and Director Raines and the others on our
    economic team who are here will have a distributional chart, and you can
    compare the two. But we committed to work with the Republicans, and this
    is a good-faith effort to do that, incorporating both their ideas for
    capital gains and some other things as well.
        Q. Mr. President, could you just lay out for us what you see as the
    primary differences in your approach to capital gains and theirs? And
    also, why did you wait until now when the two Houses have finished to
    offer this plan? Why didn't you do it earlier?
        The President. Well, because up until now I was working with both
    the Democrats and the Republicans in the Congress to develop their plans
    and to negotiate with them. But we now have two plans that, in one
    important respect--the amount of money allocated to help middle class
    families pay for higher education is clearly inconsistent with the
    budget agreement.
        If you go back and read the budget agreement, the budget agreement
    says that certain things will be done, and it says other things will be
    worked on, that there will be best efforts. There was no ambiguity here.
    We said we would allocate roughly $35 billion of this to help families
    pay for higher education. The plans aren't close to that.
        Now, can we afford to do all the things that the Republicans want to
    do and the things that are also mentioned in the budget agreement that
    are important to me and important to many Democrats? The answer is, we
    can if we have prudence and discipline.
        The principal difference in the capital gains provisions is that I
    would have a 30 percent exclusion; they would have a 50 percent
    exclusion. It's still a very large tax cut for people who can invest
    money. And I think you will see that it is not necessary in terms of the
    stock market. It's doing quite well as it is. What I'd like to see us do
    is to offer more incentive for people to start new businesses and to
    hold on to those investments for a longer period of time to build
    companies.
        Q. Mr. President, are you worried about the deficit rising if
    there----
        The President. I'm worried about the deficit rising with some of the
    less--perhaps less publicized aspects of both plans. I think that some
    of the individual retirement accounts, or so-called back-loaded
    accounts--which means they could dramatically increase in cost to the
    Treasury right outside the 10-year budget window. I'm worried about the
    indexing of capital gains. I'm worried about the weakening of the
    alternative minimum tax provisions to the point

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    where people will be making a lot of money and not paying any taxes
    ever. And we went through that once in the early eighties; the American
    people were, to say the least, opposed to it. And that could also lead
    to a big increase in the deficit.
        Q. Mr. President, is that a list of things over which you would
    definitely veto a tax bill? Republicans may be wanting to know that.
        The President. Well, first of all--I talked to Senator Lott and
    Speaker Gingrich last week, and we've had good working relationships
    with Mr. Archer and Senator Roth and others. I don't want to get into
    veto now. We knew that this, because of the unusual way in which this
    budget agreement was fashioned, that this would proceed, in effect, in a
    series of stages: the budget agreement, then the congressional
    committees, then we'd have final negotiations over the bill. I don't
    want to start talking about veto now. I want to craft an agreement
    consistent with the budget agreement that can be written into law and
    can be passed with a bipartisan majority of both sides.
        We had a bipartisan majority in both Houses for the budget
    agreement. And I think it's important that we try to preserve that here.

    Hong Kong

        Q. Mr. President, are you concerned--given the letter that came from
    Secretary Albright to the Chinese--that the Chinese will stick to their
    end of the bargain on maintaining democracy in Hong Kong during this
    transition?
        The President. Well, Secretary Albright is there, as you know, and
    what we have is the agreement, the 1984 agreement that the Chinese and
    the British asked the United States to support, and we did. And we
    expect that they will honor that agreement.
        Q. Do you think that 4,000 troops marching in is a good sign?
        The President. Well, it's a concern, I think. But we don't know yet
    that they intend to violate the agreement. They may be concerned about
    disruption, disorder. We'll just have to see what happens. But we will
    monitor it very closely. And everybody in the world knows what the
    agreement was--it's probably the most well-publicized agreement of its
    kind in modern history--and everybody has a pretty good feel for not
    only the economic but the political system of Hong Kong.
        Q. Did you watch the ceremony this morning?
        The President. I did not. I was not able to do it.
        Q. Well, what makes you think that the Chinese----

    Mike Tyson/Evander Holyfield Fight

        Q. [Inaudible]--Federal role should be in regulating boxing, and
    your personal reaction to what happened in the Tyson/Holyfield fight?
    [Laughter]
        The President. I saw the fight, and until what happened, it was a
    good fight. And I was horrified by it, and I think the American people
    are. And I don't know what the Federal role should be; I've not given
    any thought to that whatever. But as a fan, I was horrified.
        Q. Why were you horrified?

    Hong Kong

        Q. Mr. President, back on Hong Kong, is there any reason that you
    have to believe that the Chinese would allow what would amount to an
    enclave of dissent in Hong Kong?
        The President. Well, the agreement says that there will be one China
    and two systems. And it's hard to have a system with free elections and
    freedom of speech and an open press without dissent. Just look around
    here; I mean, people just have different views of things. [Laughter] I
    can't imagine how you could have it any other way.
        Thank you very much.

    Note: The President spoke at 9:55 a.m. on the South Lawn at the White
    House, prior to his departure for Boston, MA.

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