Debates On Tax Cuts Essay Research Paper

Debates On Tax Cuts Essay, Research Paper

Debates On Tax Cuts

The debates on tax cuts taking place in Congress are making the daily headlines of every radio station, newspaper, and television station in America. The issue at hand is what to do with the projected budget surplus estimated to total $2.9 trillion over the next decade. Republicans and Democrats of the House and Senate have come up with several tax cut proposals ranging from less than $300 billion to almost $800 billion worth of tax cuts. Opposing views from both party members in the House and the Senate are wrecking havoc over a budget surplus that may not be a reality and only a projection for the next ten years.

President Clinton unveiled his plan to use the estimated budget surplus to secure Social Security and Medicare first and far most, eliminate the national debt, while still having enough left over to compromise a deal with the Republican led Congress and their demand for tax cuts. A writer for The New York Times, wrote the president was willing to work with Republican leaders to use the $2.9 trillion federal budget surplus over the next ten years but was only willing to devote approximately $250 billion to tax cuts. He was quoted by The New York Times “The surplus is the hard-earned product of our fiscal discipline. We should use it to prepare for the great challenges facing our country: caring for our parents, caring for our children, freeing our nation from the shackles of debt so that we can have long-term sustained economic prosperity” (Stevenson 1999, A1, A14). President Clinton proposed a $250 billion tax cut to begin the negotiations before The Congressional Budget Office unveiled their own plan.

The Democrats were the first to submit an alternative proposal of $290 billion to the Senate. It targeted tax breaks for retirement savings, college tuition, health care, married couples, and buyers of health insurance with enough money left over to ensure the protection of Social Security, Medicare, new programs, and pay down the federal debt. The alternative proposal to President Clinton’s $250 billion tax plan ended in defeat when the Senate voted 60-39 against it. The Republicans of the House debated for a larger $792 billion tax cut before the Ways and Means Committee. The debate ended with a 223-208 vote and a Republican win. Their tax cut proposal called for across the board 10 percent cut in income tax rates phased in over a period of ten years. After 2001, annual increases would kick in only if total national debt dropped. It allowed for married couples to claim an increased standard deduction. Concerning capital gains, the House voted to cut the top tax rate for most investments held at least a year from 20 percent to 15 percent. The alternative minimum tax called to ensure personal credits that would not cause middle-class people to become subject to the tax and gradually repeal the amount over a period of ten years. Estate taxes would be phased down and eventually would repeal tax on inheritances. Pertaining to retirement, it would increase contribution limits to some employee benefit plans and reduce time for vesting in some pensions from five years to three years (Associated Press 1999, 1). While the $792 billion was being debated before the Senate, Richard W. Stevenson reports in The New York Times “Republicans suffered a symbolic setback when they were unable to sidestep a rule–written at a time when Congress was intent on limiting the growth of budget deficits–that makes it difficult to pass tax cuts that remain in effect for more than ten years.” It was also reported “Republicans asked for a waiver of the rule, a step that requires 60 votes. But they could muster only 51 votes, as all 45 Democrats and three moderate Republicans voted to keep the rule in effect” (Stevenson 1999, 3).

Proud of the Republican win, U. S. House of Representatives Republican Majority leader and Chairman of the Ways and Means Committee Dick Armey of Texas was quoted after the vote by an article in The Washington Times saying “See, I told you we had the horses in the barn” (Godfrey 1999, 1). The meaning behind this statement probably stemmed from an uncertain feeling he had at the beginning of the debate. There were a few moderate Republicans within the party who objected the proposal at first. After the provision of reducing the federal debt was added, the small percentage of the moderates who objected the proposal, along with six Democrats who made up for the four Republicans who voted against tax cuts were whipped around. The New York Times quotes Speaker of the House J. Dennis Hastert of Illinois “So Mr. President, we say, what’s wrong in letting American taxpayers’ keep more of their hard-earned money, we trust them to spend it right, and we think you should, too” (Stevenson 1999, 2). President Clinton has vowed to veto the Republican plan and repeated his view that “Republican plans to cut taxes by $800 billion or more over the next decade would make it impossible to revamp Medicare or add billions in new spending for education, the military and the environment” (Broder 1999, 2).

With the passing of the Republican tax relief proposal in the House, media reports I have recently read or heard claims that Democrats are accusing Republicans of offering huge tax breaks to businesses and investors at the expense of the poor and middle class. A recent headline from Time.com