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Clinton Offers His Own Tax Package

Some Republicans say the president is moving in their direction

WASHINGTON (AllPolitics, June 30) -- President Bill Clinton offered his own package of proposed tax cuts today, saying that Republican plans fall short in offering education and training incentives for middle-class families.

"America's families deserve a tax cut, and they deserve one that reflects their values," Clinton said.

The president's package, details of which leaked out over the weekend, offers a net tax cut of $85 billion over five years, like congressional proposals. But it tilts more strongly toward middle- and lower-income families, while offering less capital gains tax relief to investors. Some Republicans reacted favorably to Clinton's plan, suggesting there is room for compromise.

Clinton, who spoke to reporters on the White House's South Lawn, said the Republican tax bills approved by the House and Senate last week contain some good elements, but are not the best way to cut taxes nor 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," Clinton said. "They do an inadequate job of opening the doors for 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."

The key points of Clinton's proposal include:

• A $500-per-child tax credit through the year 2002 to families with children 16 and under, and after that, through age 18. It would be available for families making $75,000 a year or less.
• A 100 percent credit for the first $1,000 of college costs, and 50 percent for the second $1,000 of college costs.
• A $2,500 deduction for interest on student loans.
• Support for the Senate's 20-cent-per-pack increase in cigarette taxes, with all the revenue earmarked children's health programs.

In response to a question, Clinton said the administration's proposal gives the vast majority of tax relief to middle-income people -- the 60 percent of taxpayers in the middle.

"Our plan targets hard the middle class, as well as working people who make more modest incomes," he said.

Clinton declined to say what ingredients in the GOP plans might provoke a presidential veto, if congressional Republicans spurn his ideas and send him their own unified plan. Clinton said he has a good working relationship with the Republican leadership and wants a bipartisan agreement.

"I don't want to start talking about veto now," Clinton said. "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."

Before the president spoke, a senior Clinton administration official provided some of the details.

The aide told CNN the price tag of Clinton's tax cut plan is $85 billion over five years and $241 billion net over 10 years.

Clinton's proposal would extend the $500-per-child tax credit until age 17 initially, and then to age 18 in 2002 and thereafter. Income eligibility for this credit would be couples earning up to $75,000 annually during the inital phase-in. After the year 2000, eligibility would be expanded to couples earning as much as $100,000 a year, the official told CNN.

This per-child tax credit would be $400 in 1998, the full $500 in 1999 and be indexed to inflation thereafter, the official said.

Low-income families who do not pay federal income taxes would be eligible for the credit as long as they paid federal payroll taxes that exceeded their per-child credit.

Over the 10-year time frame, the administration official said Clinton's per-child tax credit was more generous than the House and Senate Republican plans. Initially, the Clinton plan cut the benefit off at age 13.

Clinton also has significantly modified his education tax cut proposals. The official said the tax deduction for student loans was in addition to other education tax incentives totaling just under $35 billion.

The president's capital gains tax proposal would benefit investors who held their stocks for more than a year. Clinton's estate tax plan is modeled after Senate Democratic leader Tom Daschle's proposal to ease the tax burden on passing along family-owned small businesses and farms after a death.

Next week, after the Independence Day recess, Senate and House leaders will begin negotiations toward a final tax package, and Clinton wants his ideas considered in that process.

Some congressional GOP leaders praised Clinton for offering a plan that they said brings his tax goals closer in line with the House and Senate GOP tax plan goals.

Sen. Kay Bailey Hutchison (R-Texas) and Rep. Bill Paxon (R-N.Y.), both members of the GOP leadership, called a news conference to praise Clinton's plan, and to remind reporters that Republicans have long fought for tax relief.

"We're very pleased that the president has taken a giant step closer towards our tax cut plan," Paxon said. "We're especially thrilled that he has reversed his opposition to our child tax credit for teenagers."

Hutchison, expressing slight chagrin, said, "I wish he had come in a little earlier ... I don't think it's quite fair for the president to come in with changes that are not in either the House or Senate bill, knowing that a conference committee is supposed to resolve the differences between the two houses."

But both members expressed hope for resolving differences that remain between both House and Senate versions of the tax bill, and with the White House. "We believe we can continue to work in a bipartisan fashion here in the Congress," Paxon said. "While there remain some differences between the president and the Republican tax cuts passed in Congress, I'm confident, we both are confident, that these will be able to be worked out."