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Archer's Tax Proposal Draws Political Fire

Package portends wrangling over budget pact's details

WASHINGTON (AllPolitics, June 10) -- Announcing what he termed the capstone of the GOP's 1994 Contract With America, House Ways and Means Committee Chairman Bill Archer unveiled an $85 billion tax plan, including the largest tax cut since 1981.

"The tax relief package we will consider represents a solid first step toward a smaller government for bureaucrats in Washington and a larger paycheck for workers in the heartland," Archer told reporters yesterday.

Critics wasted little time calling it a sop to the wealthy.

The Democrats on Archer's committee fired off a statement, saying, "Republicans have siphoned off many of the gains from our current fertile economic climate and delivered them directly to the rich."

And, announcing the imminent release of a Democratic alternative proposal, House Minority Leade Dick Gephardt (D-Mo.) said Archer's plan "defies good sense and common fairness."

Still, Archer's proposal largely draws on broad tax priorities set by the recent balanced budget agreement. At a glance, the plan includes:

• A $500-per-child tax credit for children under 17.

• Reducing the capital gains tax from 28 percent to 10 percent for couples earning under $41,200 a year and to 20 percent for those earning above that.

• An education tax credit of up to $1,500 to help parents pay college tuition, as well as a $10,000 deduction through education investment accounts. It would also allow penalty-free withdrawals from individual retirement accounts for education.

• Relief on estate taxes, raising the tax-free credit from $600,000 to $1 million.

• A repeal of the corporate alternative minimum tax.

• Tax hikes: an extension of the airline ticket tax ($30 billion over five years); a new federal income tax on Indian casinos; and a phase-out of subsidies for ethanol.

Treasury Secretary Robert Rubin quickly appeared before reporters, quashing Archer's proposals for capital gains tax and estate tax relief as excessive, while he called the child tax credit "very good policy."

The White House supports far more limited capital gains relief, calling only for exemptions on the first $500,000 gain from the sale of a home. On the per child tax credit, the administration would limit the provision to children 13 and under.

Contending Archer's provisions would restrict the administration's proposed $1,500 education credit, Education Secretary Richard Riley said Archer's package is "a message of despair for America's lower- and middle-income students and families." Archer also eliminates the president's proposed tax incentives for workers seeking to upgrade their skills.

The proposed tax on tribal casinos generated outrage from Indian representatives. Likening tribes to state government, Cecil Antone, lieutenant governor of the Gila River Indian Community in Arizona, said, "We need the money to provide infrastructure, housing and water and sewage facilities."

Both Senate Majority Leader Trent Lott (R-Miss.) and Minority Leader Tom Daschle oppose the gambling provision, but Archer said the casinos should be taxed like any other business.

"The problem is that, as Indian gambling grows and grows and grows, it begins to compete with dollars in the outside sector that are taxes -- other business entrepreneurs." Indian casinos generate about the same revenue as Atlantic City casinos, and about 50 percent of those in Las Vegas.

Though Archer told reporters he expects the package would be signed into law, his announcement -- and the reaction which followed -- foreshadowed a long and politicized debate.

"There is an awful lot of stuff in here that looks like a long-term conservative wish list of how to redo the income tax code," Deloitte & Touche analyst Clinton Stretch commented to The Associated Press.