U.S. News

Thursday, Oct. 15, 1998

Congress approves a slim tax-cut bill

GOP had dreams of slashing $101 billion but will walk away with a $9.2 billion package

By CURT ANDERSON
Associated Press

   WASHINGTON - After teetering on the brink of defeat, House and Senate Republicans tentatively agreed Wednesday on a tax package of $9.2 billion that would renew several expiring business credits and also help farmers and the self-employed.
   In addition, congressional Republicans and the White House agreed to include four farm tax provisions in a huge wrap-up bill that will allow Congress to end its work and return home to campaign for re-election.
   Emerging from a late-afternoon negotiating session, House Ways and Means Committee Chairman Bill Archer, R-Houston, said the tax measure was "in the process of being agreed to" but refused to release details.
   Just a few hours earlier, Senate Majority Leader Trent Lott, R-Miss., had all but pronounced the modest "extenders" tax package dead. Had it failed, it would have been yet another loss for Republicans who once dreamed of tax cuts topping $101 billion this year.
   Among items agreed to in the final bill are popular tax credits for corporate research and development and for companies hiring workers from economically disadvantaged groups, according to a Republican congressional aide speaking on condition of anonymity.
   

Help for farmers

   Meanwhile, Sen. Charles Grassley, R-Iowa, said four tax provisions aimed at helping farmers, hit hard this year by low commodity prices and disasters, would be included in the final wrap-up bill being pieced together by the White House and Republican congressional leaders.
   One item would create new tax-deferred "FARRM" accounts for farmers to contribute up to 20 percent of taxable income annually for up to five years.
   "This bill makes it easier for farmers to save money during the good years for a cushion during the bad years," said Grassley, a finance committee member.
   Other items would allow income averaging, for farmers to smooth out ups and downs in their incomes; use of losses this year to offset income earned the past five years, possibly triggering a refund for many farmers; and favorable tax treatment for farmers who accept transition payments early.
   The emerging $9.2 billion compromise reached Wednesday was made up of parts of House and Senate alternatives. It awaited only a final go-ahead from Senate Finance Committee Chairman William Roth, R-Del., aides said.
   In addition to the research and development and work opportunity credits, negotiators agreed to modify and extend a credit that gives tax advantages to companies operating overseas, the GOP aide said.
   For individuals, the agreement excludes from calculation of the alternative minimum tax certain family credits including the $500 per-child credit. It also will move up the date for self-employed people to deduct their health insurance premiums fully, probably prior to 2003 instead of 2007 as in current law.
   

Training for workers

   The measure also would extend programs that train workers displaced because of international trade agreements and that provide job opportunities for people leaving welfare, the aide said. It also includes language sought by Archer and Sen. Phil Gramm, R-Texas, to permit Texas to join most states in forgiving payroll taxes for students employed by public universities.
   Dropped were Senate provisions to renew alternative fuels and wind energy credits, but they don't expire until next year.
   The difficulty Republicans encountered over the business-friendly tax extenders bill marked continuation of their inability all year to reach consensus on tax relief, a cornerstone of the GOP agenda.
   After agreeing in a budget resolution to seek up to $101 billion in tax cuts, the House was able to pass a five-year, $80 billion bill with broad political appeal that would have helped married couples, working older Americans, people with small savings accounts and farmers, among others.
   That bill foundered in the Senate, in part because President Clinton promised a veto and contended it would spend some of the budget surplus that ought to be reserved for Social Security. Senate Republicans were unable even to hold all their own votes for the bill.
   Archer blamed Clinton for blocking the tax cuts and promised the GOP will be back next year with a much bolder plan to return some of the budget surplus to taxpayers and to infuse money into the fragile economy.
   "I think anybody who refuses a tax cut like the president has this year is playing Russian roulette with the economy," Archer said.
   

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