[Weekly Compilation of Presidential Documents Volume 33, Number 27 (Monday, July 7, 1997)]
[Pages 992-995]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks on Departure for Boston, Massachusetts, and an Exchange With 
Reporters

June 30, 1997

Tax Cut Proposal

    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.
    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

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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. 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

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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 revisions to the point 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.

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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 the 
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 and Evander Holyfield Fight

    Q. [Inaudible]--Federal role should be in regulating boxing, and 
your personal reaction to what happened in that 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.