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Budget Summit [1990] [4]
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Budget Summit [1990] [4]
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Records of the White House Office of the Chief of Staff to the President (George H. W. Bush Administration)
John Sununu Issues Files
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Originally Processed With FOIA(s):
FOIA Number:
1998-0004-F[1]; 1998-0251-F
1998-0004-F[1]; 1998-0251-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin: Chief of Staff, White House Office of
Series:
Sununu, John, Files
Subseries:
Issues Files
OA/ID Number:
29138
Folder ID Number:
29138-006
Folder Title:
Budget Summit [1990] [4]
Stack:
Row:
Section:
Shelf:
Position:
G
10
18
3
2
REVENUES
AGREED #1
45,4
IRS
4,3
RETIREE
2.0
S/L HI
G.O.
ALC.
12.
BUSINESS
2.5
S/L SS
11.7
ENERGY
60.
143.9
PAGE R/D - 6.7
SB.
-8.
INDEX.
-4.5
\
10%BASE
-1.0
ENT
-1.0
-
\
ENERGY. -3.5
133.9
133.4
-24.7
13,21
120
147,11
170
USER FEES,
9.21
24.7
121
BANK.
4.
123.4
13,21
10
133.4
TAX PACKAGE
AGREED. 45.4.
IRS.
9.4
RETIREE HEALTH 1.3.
STATE E LOCAL HI 5.2.
ALCOHOL. 12.2
BUSINESS Coop.
2.0
75.5
S.S
10,-
PEASE 50k/21/2/11
15.-
-
25.
SUB 100.5.
ENERGY 48%
148.5.
X 3.3
REV. COSERS.
ENERGY.
3.5.
L.I. HOUSE/ AE
2.0.
SMALL Bus.
8.0
INDEX.
4.5.
18.0
16-Sep-90 9:00pm
#90-3 117
PRELIMINARY
16-Sep-90
(D=#D90-5 121}
- BUDGET SUMMIT -
Estimated Revenue Effects of a 45% Capital Gains Exclusion and
a Cutback on Itemized Deductions for High-Income Taxpayers
Fiscal Years 1991-1995
[Billions of Dollars]
Provision
1991
1992
1993
1994
1995
1991-95
1. 45% capital gains exclusion (15.4% rate)
3.7
-3.2
-5.6
-8.1
-8.3
-21.5
2. Disallow 35% of itemized deductions for taxpayers with
AGI over $200,000 (joint); $120,000 (single) : and $160,000
(head of household) (1)
0.7
4.5
4.8
5.6
6.4
21.9
GRAND TOTALS
4.4
1.3
-0.B
-2.5
-1.9
0.4
Joint Committee on Taxation
NOTE: Details may not add to totals due to rounding.
(1) Estimate includes interaction with capital gains provision.
9/26
8:56
FULLY IMPLEMENTED
30%EXCLUSION
CHARTS A PROBLEM
INDEXATION A PROBLEM ADMINISTRATION IS A PROBLEM
"NEW YORK" BAR ASSOCIATION
BOB MICHAEL ARGUES STRONGLY FOR INDEXATION
ALL IN DIFFICULT SITUATION
MITCHELL JUMP START THE ECONOMY
LOOPHOLE PROBLEM. CAPITAL GAINS EXCLUSION
DICK DARMAN PACMAN- STRUCTURAL PROBLEM WITH DEFECIT
IT CAN'T BE CONFINED TO AVERAGE PEOPLE
COMPLEXITIES DON'T ARISE WITH CALCULATION
BACK TO PIERCE THE BUBBLE
"FLATTEN @ 31%
"INDEXING IS VERY CRUCIAL TO THE PACKAGE"
BOTH SIDE FEEL BEING TAKEN
"ENTITLEMENTS TOO BIG A CUT.."
SEP 26 '90 19:06
BECKLEY WEST VA
PAGE. 01
THE WHITE HOUSE
WASHINGTON
TO: The Chief of Staff and Senator Dole
FR: Andy Card
1 To Follow
202-224-3163
SEP 26 '90 19:06 BECKLEY WEST VA
PAGE. 02
I DO WANT TO CLARIFY ONE POINT THAT SPEAKER FOLEY
AND LEADER MITCHELL RAISED. EARLIER TODAY I SAID THE
DEMOCRATS HAVE NOT COME FORWARD WITH A PACKAGE. THEY
SAY THEY HAVE PUT A PACKAGE, OR AT LEAST A SERIES OF
PROPOSALS, ON THE TABLE IN THE PRIVATE NEGOTIATIONS. I
ACCEPT THAT IN THE PRIVATE NEGOTIATIONS THERE HAVE BEEN
SUCH PROPOSALS. I APOLOGIZE FOR MISSPEAKING ON THAT
POINT.
- 2 -
HOWEVER, MY CONCERN REMAINS THAT WE HAVE YET TO SEE
FROM THE DEMOCRATS, A COMPREHENSIVE PLAN THAT CONTAINS
SERIOUS SPENDING CUTS, NECESSARY BUDGET PROCESS REFORM
AND ENFORCEMENT, GROWTH INCENTIVES, AND A SOUND
APPROACH TO DEFENSE. I DO HOPE THAT IN THE
NEGOTIATIONS TAKING PLACE AS I SPEAK, THAT WE CAN SEE
PROGRESS THAT WILL BRING THIS PROCESS TO A CONCLUSION.
MIDNIGHT
ENTITLEMENTS.
-MIL. 4.
1.5.
5.5
=
2HARK + NUT.
BANK @4.
KEEP FEE TOTAL
TAX.
SMALL SECRET OF GROWTH
INDEX -4.5
SM B. IN INCENT
-8
18B
11
E. INCENT
-3.5
I yr LIH/R.D
1 2.
-11.2 -
USING you.
mg
MOVE.
.
is
8
- 29.2
PHONE.
PAIR.
13.9
15.3
ENERGY.
L.85
29.2
60
DAY
COLA FREEZE -
(-10) +10 { +10 {
TAX INDEX DELAY
9/27/90 4 40 PM
FOLEY COMMENT PRESSURE ON PRESIDENT
WANT TO PROPOSE FOR OUR CONSIDERATION
32/30/20 CAPITAL GAINS
WANT A 2% AGI ? @ 50K/70K
2% / 50E/70K/100K
$12 12 B.
TRY
R/E 1YR,
FUELS 84 @ 38.4 95%
E. 3.5
-45.4
TETTE. -17.7
IRS 9.F
1528 32
RETIRE 1.3.
S/CHI 5.2.
Are 12.2.
LOOP 2.5.
Soc SEC
10. +10
PAYOLL SMB.
CAP. TAINS OF FOREIGN NATS. ON U.S. STOCKS.
POSSIBLE COMPROMISE -- 9/25/90 -- 11:00 a.m.
(A) ENTITLEMENTS (detail attached)
(1) Democratic offer of 9/17 modified as here below
(2) Add $1.5 billion to Agriculture savings
(3) Include Administration-proposed GSL reforms
(4) Make child nutrition subsidies more progressive
(5) Include "Harkin" foster care administration reform
(6) Include "Harkin" child support enforcement reform
(7) Delete inequitable civilian and military COLA freezes
and substitute 3-month COLA delay for all but means-
tested entitlements and veterans compensation.
TOTAL ENTITLEMENT SAVINGS:
$112.5 billion
(B) FEES ORDINARILY CLASSIFIED AS NEGATIVE OUTLAYS
TOTAL:
$15 billion (from list to be mutually agreed)
NOTE: Domestic discretionary spending increases (TBD) would
have to be included in any calculation to determine net
domestic spending. Even with fees, net domestic "spending"
would not reach $120 billion.
(C) DEFENSE: Nunn adjusted for Desert Shield for 3 years
(out-years TBD)
(D) REVENUES (See attached list)
(E) PROCESS REFORM AND ENFORCEMENT (See attached)
POSSIBLE COMPROMISE -- 9/25/90, 11:00 a.m.
1991-95
REVENUE MEASURES
Raisers
(1) IRS reforms
4.3
(2) Airport/Airway increase
11.8
(3) State and local HI - modified
6.0
(4) State and local SS
11.7
(5) Shippers (Harbor maintenance)
1.7
(6) Salvage value/insurance - modified
0.9
(7) Pension/retiree health (Senate)
2.0
(8) DAC - Insurance reform - modified
10.0
(9) Alcohol - modified
12.0
(10) Luxury excise taxes
9.0
(11) Ozone depleting chemical excise tax
0.5
(12) Deny deduction of interest on corporate
income tax underpayments
4.5
(13) Tobacco
5.9
80.3
(14) Foreign Compliance
0.3
(15) Energy taxes
49.0
(16) Delay tax indexing 3 months
14.0 (e)
(17) Raise HI threshold by 10,000
7.0
70.3
150.6
Special Incentives
(1) All extenders 1 year (including
telephone and LUST)
-2.6
(2) Energy production and security
-3.5
(3) Enterprize Zones
-1.0
(4) Increase R&D credit to 25% (one year)
-0.3
(5) Small business investment deduction
-8.0
(6) Prospective indexing (all assets)
-4.5
-19.9
130.7
9/25 12:00 p.m.
ENTITLEMENT OPTIONS
($ billions)
DEMOCRATIC
DEMOCRATIC
POSSIBLE
OFFER 9/10
OFFER 9/17
COMPROMISE 9/25
1991 1991-95
1991 1991-95
1991
1991-95
Agriculture/price supports
-1.1
-10.3
-1.3
-11.3
-1.3
-12.8
---
Crop insurance
---
...
---
-0.5
-0.5
Medicare:
Providers
-3.4
-31.5
-3.1
-30.0
-3.1
-30.0
Deductible/premium/
co-insurance
-3.9
-40.8
-1.5
-22.0
-1.5
-22.0
Subtotal Medicare
-7.3
-72.3
-4.6
-52.0
-4.6
-52.0
Civil Service:
Lump sum
-1.3
-8.5
-1.3
-8.5
-1.3
-8.5
Postal Service and FEHB reforms
-0.9
-6.8
-0.9
-6.8
-0.9
-6.8
COLA:
Civilian
-0.7
-9.0
-0.3
-1.5
-3.8
-13.9
Military
-0.9
-12.0
-0.6
-9.2
-0.3
-1.2
Medicaid/employee payor/
pharmaceutical
-0.2
-2.6
-0.2
-2.6
-0.3
-2.6
Stafford loans (GSLs)
---
-0.4
---
-0.7
-0.1
-3.3
Child nutrition
---
- - -
---
---
---
-0.5
Unemployment insurance
---
---
---
---
---
---
Rail pension fund liability
-0.1
-1.0
-0.1
-0.4
-0.1
-0.4
Foster care admin
---
---
---
---
-0.2
-2.9
CSE admin
---
---
---
---
-0.4
-2.1
Social security overpmts
---
-0.2
---
-0.2
---
-0.2
FHA assignment waiver
-0.2
-1.0
-0.2
-1.0
-0.2
-1.0
Other FHA reforms
-0.5
-2.1
-0.5
-1.3
-0.5
-1.3
Tongass
-0.2
---
-0.2
---
-0.2
Veterans
-0.4
-2.2
-0.4
-2.2
-0.4
-2.2
Subtotal entitlements
-13.6
-128.6
-10.4
-98.4
-14.4
-112.4
Stock Expensing Proposal: Five Year Receipts effect ($'s in billions)
Preliminary Estimates
Deduction As A Percentage of Purchase Price
Deduction Limitation
15.00%
20.00%
25.00%
30.00%
35.00%
$30,000
-4.4
-5.4
-5.9
-6.3
-6.3
$40,000
-5.1
-6.2
-6.9
-7.8
-8.1
$50,000
-5.2
-7.1
-8.0
-8.4
-9.7
$60,000
-5.2
-7.2
-9.0
-9.8
-10.1
$70,000
-5.3
-7.2
-9.1
-10.2
-11.5
DELAYS IN COLAS VS 5.5 185%
¥
20B vs 60Day Delay
10.5
12.2 22.7.
IF NET RESULT IS THAT AT TOP
21.8
RESPONSE
AG +1
12.83
- 6.7
9/17 AS IS.
-
....
88.95
CHANGES
BANK.
@
4,00
MIL.RET.
.4
go to SEN REC.
F HA.
202
INDEX -4.5
return to
GSL.
2.2.
10% of SALES. -1.0
EITC /ST D
0
FEE s @
9.21.
AGREED oh.
45.4
INCLUDE NUTR
.S
1.3
HARKIN REFORMS CHILD
219
RETIRE to
2.0
5.2
FOSTER 2.1
S/L HI.
6,0
ACC. oh
12.-
MEDICARE PHASE IN.
20B MEANS TEST
15.
Bus. coop.
2.5
ENERGY.
60, /
S/L. S.S.
11.7.
133.76.
-
13. -
TO OUR SIDE.
120, +.
133.4
TAX PACKAGE
AGREED. 45.4
IRS.
9.4
RETIREE HEALTH
1.3.
STATE E LOCAL HI 5.2.
ALCOHOL
12.2
BUSINESS Loop.
2.0
75.5
*
S.S
10,-
PEASE 50K/2'/2
15.-
25
SUB 100.5.
ENERGY 48,
148.5.
X 3.3
REV. LOSERS
ENERGY.
3.5.
2.0
SMALL Bus.
8.0.
INDEX.
4.5.
18.0
TAX PACKAGE
AGREED. 45.4.
IRS.
9.4
RETIREE HEALTH 1.3.
STATE E LOCAL HI 5.2.
ALCOHOL 12.2
BUSINESS Coop.
2.0
75.5
*
S.S
10,-
PEASE 50K/2'/2
15.-
-
25.
SUB 100.5.
ENERGY 48-
148.5
X 3.3
REV. COSERS.
ENERGY.
3.5.
L.I.HOUSE/KE
2.0.
SMALL BUS.
8.0.
INDEX.
4.5-
18.0
TAX PACKAGE
AGREED 45.4
IRS.
9.4
REMREE HEALTH 1.3.
STATE E LOCAL. HI 5.2.
ALCOHOL. 12.2
BUSINESS Coop.
2.0
75.5
*
S.S
10,-
-
PEASE 50K/2'/2
15.-
-
25.
SUB 100.5.
ENERGY 48.
148.5.
X 3.3
REV. LOSERS.
ENERGY.
3.5.
L.I.HOUSE/RE
2.0
SMALL BUS.
8.0
INDEX.
4.5-
18.0
TAX PACKAGE
AGREED. 45.4
IRS.
9.4
RETIREE HEALTH 1.3.
STATE E LOCAL. HI 5.2.
ALCOHOL
12.2
BUSINESS Coop.
2.0
75.5
S.S
10,-
-
PEASE 50K/2'/2
15.-
25.
SUB 100.5.
ENERGY 48.
148.5.
X 3.3
REV. LOSERS.
ENERGY.
3,5.
L.I.HOUSE/AE
2.0.
SMALL Bus.
8.0.
INDEX.
4.5.
18.0
8:57 9/27
MEDICARE POINT - LOWINCOME PROBLEM.
DON'T HAVE FED sov. 100%
IF START WITH [] WANT TO SPEND.
TAXES:
2 OPTIONS
FIRST A LOT OF AGREED AREAS:
mmm
DPERLMAN AMT NO S, NO D.
2) 50/70/100 50/100/100 WAS PRICED. WANTS A SINGLE RATE FOR THE WHOLE THING.
3) PEASE + ENERGY-
OPTION 2.
40% EXCLUSION, AMT DOESN'T WORK.
PEASE @ 6%
DISTRIBUTION...
15/28/29.5.
LOSES #29 $ 29 B, PEASE RAISE $ 36B
9/25 DEM.
ENTITLEMENTS
FREEZE COLAS WOUND UP IN PAY
RAISE.
"CORE" " 88
AG. 118.8
12.
REVENUE
MEDICARE 52
58.
30% IN ALL 5 Yes.
LOSERS
R/D
5.2
1.0. LEF.
PERM. EXT.
20% w.60% a 25%@75%
COLAS START @
MIC. RET. @55.
4.
L.I. HOUSING
3.7.
NOT TOL/WST
GSL's snu@ @ 1.
OTH. EXP. I YR.
2.6.
PHA LEF.
1.5
ENT. z.
1.0 B.
BIF
6.-
SB.EQ.
8. B.
EN. INC.
3.5 B.
INCLUDES.
Don't TO PANGTTA
Bot:
X
TO NUTRITION
CAT.
102.93.
GITC.
15.9:B.
1/2 FOR 55@85% 10,
BEYOND CHILD
39.9. B.
CAME
FEES
9.21
121
119.4
RAISER.
LESS
2 PART. PREM. OF FSET
95% OF CONTRIB.
50% TO DEF. x, 50% TO HIGHWAY FUND/2010
119.
ENERGY, MOTOR F @84
38.4B.
24
HIGHWAY FUND?
3/44
PETR. REFINED PROD
5.B.
HI TO gok. 19.2B
AGREED
45.4 B.
S.S. oth 1/2.
10. B.
IRS.
9.4.
170.4.
RETIREE HEALTH
1.3
S/L HI
5.2
130,5.
ACC.
12.2
B. Loop.
2.5.
Don 't
Sine
PAYROLL TAX Det. STAB
O.
The
6% OF AGI IN Gx. look 150kj.
RATE INCREASE LIMIT ON ITEM. DED.
21.8.
9/25 R.
DARMAN
ENTITLEMENTS
REVENUE-
-
20/60 25/60
CORE
88.
PERM. EXT. R/D
5.
25/75.
AG.
12.8
LIH.
3.7.
AG. CROP INS.
.5
0 THERS 14. 2.6
PROVIDERS
i
MEDICARE
58.+4. (34.).
GNT. 2
1.B.
SS. @85% (1/2)
10.
SB. Gq.
8.
GSL's
33
EN-
3.5.
COLAS
3 MONTH. FREEZE
15.1
19.8.
2/3 ABOVE SENATE
FHA.
1.5.
CHILD are. 128. GITG - 10. -
BIF
4.
III
INDEXING.
4.5
GET
3
NUTRITION
.5
50
HARKIN
1
2
S.
ENERGY.
B.
HARKIN
2
AGREED
45.4
+2BILL (6-4)
0
FEES. @ 9+
IRS
9.4.
127.4
TELEPHONE
10.=
DEDUCT BYRD
RETURE
1.3
120. NET.
S/C HI
6.-
ALC.
12.2.
B.LOOPS. B. LOOPS.
20
PAYROLL-
O.
HI
ss..
LIMIT.
ss.
10.
HI 9 bok.
5.
6%AGI
0
S/L.SS. S/L .55.
11.7.
ENTERPRISE ZONES
-1,
ENERGY INCENTIVES
-3.5
RED/LIH.
-2.9
SBV INCENTIVES.
-10.
1.7.4
2 YR WINDOW
EXPENSING 40K/130K
-2. or - 4. ?
(39
EXPENSI NG SCIENT. Equip-
=2 ?
F
35.
S TAX RATE
- 2.2.
4.4
R/D. 25 FOR ALL/30 SMAN
.2 EXTRA.
ROLLOVER @ so
-15.
-
ROLLOVER e 10k/3yrs
- -2.
-2.2.
N.Y. TIMES 7
GROWTH, SOCIAL SECURITY, ENTITLEMENTS
-
CORE PACKAGE
ENT. ZONE
1,B
ENERGY
3,5 - 4,0
R/D L/I
209
R/D 30%FOR SMALL
3
CRITORIA SHOULD BE $50,000,000 SHARE HOLD ER EQUITY 1, X W
INDEXING (N.Y TIMES)
EXPENSING TANGIBLE 40K- 13 OK
2B-
SCIENTIFIC EQUIP
2
CORPORATE EQUITY BUABLE/RATE S PHASE OUT AMOUNT
$
-
OB
11.4
10
21.4
SMALL BUSINESS EQUITY DEDUCTION
10.
30% vs 25%
200000.
vs. 5.0,000,000 vs. 25, 000, oro.
23.4
& dropped ROLLOVER OF ASSO is BY IN-DIVIDUACE
Ascommend DIVIDEND/ESIMINATE DOUBLE pay (REPTACE 5,B.E D.) 25B
$ 23B + ROCCOVER
78, -
ENERGY 48
30
PEASE 12
18:
ZEBLY
17.
S/L. SS 11.7
5.3.
-LUXU.RY. - 9.
14.3
29-Sep-90 4:03am
#90-3 225
PRELIMINARY
29-Sep-90
{D=#90-5 226}
- DEMOCRATIC SUMMIT PACKAGE
Fiscal Years 1991-1995
[Billions of Dollars]
Item
Effective
1991
1992
1993
1994
1995
1991-95
A. Revenue-Losing Provisions
1. Enterprise zones [target]
1/1/91
--
-0.1
-0.2
-0.3
-0.4
-1.0
2. Energy incentives
1/1/91
-0.3
-0.5
-0.8
-0.8
-1.0
3.4 3.5
3. Extend certain expiring provisions through 12/31/91:
a. R&E credit (1)
--
-0.6
-0.4
-0.1
-0.1
(2)
-1.2
b. Low-income housing credit
--
-0.2
-0.3
-0.4
-0.4
-0.4
-1.7
4. Additional growth incentives for small active corporations
(3)
-0.5
-1.5
-2.1
-2.9
-3.8
-10.7
5. Increase EITC (4) [target]
1/1/91
-0.1
-2.0
-2.2
-2.3
-2.4
-9.0
Subtotals, Revenue-Losing Provisions
-1.7
-4.8
-5.8
-6.8
-8.0
-27.9 .1
B. Revenue-Raising Provisions
1. Motor fuels energy tax (9 cents)
(5)
12/1/90
7.6
8.8
8.7
8.9
8.9
43.0
2. Tentatively agreed items (see attached)
(6)
--
4.7
5.9
7.0
7.1
7.3
31.9
3. Additional tentatively agreed items:
a. IRS management reforms [target]
(7)
--
3.0
1.8
1.8
1.5
1.2
9.4
b. Retiree health with reversion compromise
1/1/91
0.5
0.2
0.1
0.1
(8)
0.9
C. State and local HI (9) [target]
1/1/92
--
0.7
1.4
1.6
1.6
5.2
d. Distilled spirits, beer, wine [target]
1/1/91
1.5
2.1
2.1
2.1
2.2
10.0
e. 10% luxury excise tax
1/1/91
0.2
0.4
0.4
0.5
0.6
2.1
f. Corporate interest deduction
1/1/91
4.2
-0.5
-0.6
0.4
0.5
4.0
4. Limitation on itemized deductions (10) [target]
1/1/91
0.6
5.0
4.9
5.5
6.0
22.0
5. Delay indexing of top bracket (1 year)
1/1/91
0.3
0.5
0.5
0.5
0.5
2.3
6. Increase HI wage cap to $67 500 [target]
1/1/91
0.7
2.1
2.2
2.4
2.5
10.0
t?
$69,000
11. Payroll Tax Speed-up
Page 2
1.0
2.2 --3.2
--
:
--
Item
Effective
1991
1992
1993
1994
1995
1991-95
10. Business Tax Loopholes
0.2
0.4
0.5
0.6
0.7
2.5
7. State and local social security (OASDI) [target]
(Net)
--
0.9
1.4
1.5
1.6
1.8
7.2
8. FUTA 0.2% surtax
(Net)
1/1/91
0.7
1.0
1.0
1.0
1.1
4.8
9. Taxation of social security benefits (4)
1/1/91
0.3
1.0
1.1
1.2
1.4
5.0
Subtotals, Revenue-Raising Provisions
25.2
30.4
32.1
34.4
35.6
157.8
160.3
Net Deficit Reduction
23.5
25.6
26.3
27.6
27.6
130.8
24.7
133.3
NOTES: Details may not add to totals due to rounding.
Interaction between or among items has not been taken into account for the purpose of this table.
(1) Base limitation is retained at current level of 50%.
(2) Loss of less than $50 million.
(3) For small business equity deduction, preference included in minimum tax, recapture deduction as ordinary income, 5-year sunset, and
$160,000 annual purchase limit. For newly-issued stock of small business corporations issued after date of Summit agreement, allow
indexing of basis for inflation occurring after date of acquisition, sold after 12/31/91, and held for at least one year.
(4) Amount does not correspond to that used in the accompanying distributional analysis.
(5) At least 50% of motor fuels tax increase dedicated to deficit reduction; remainder dedicated to Highway Trust Fund (20% of this portion to
be allocated to mass transit account). Each State to receive Highway account apportionments and allocations equal to at least 95% of its
contribution attributable to increased revenue.
(6) Excludes distilled spirits, beer, and wine, corporate interest deduction, and luxury excise provisions.
(7) Estimate will be provided by the Congressional Budget Office (CBO).
(8) Gain of less than $50 million.
(9) Rate = 0.8% in 1992, 1.35% in 1993, 1.45% in 1994 and thereafter.
(10) Disallow itemized deductions in an amount equal to 4% of AGI in excess of $100,000 for single returns, $100,000 for joint returns, and
$100,000 for head of household returns. Proposal does not apply to medical expenses or investment interest. Disallowance under the
proposal cannot exceed 80% of otherwise deductible itemized deductions subject to the proposal.
Attachment {Table #90-3 109}
#90-3 109
29-Sep-90
PRELIMINARY
29-Sep-90
- BUDGET SUMMIT -
Tentatively Agreed Items
Fiscal Years 1991-1995
[Billions of Dollars]
Provision
Effective
1991
1992
1993
1994
1995
1991-95
I. Provisions Affecting High Income Individuals
A.
Impose 10% luxury excise tax (1)
1/1/91
1.0
1.9
2.0
2.0
2.1
9.0
II. Health and Environment
A. Increase tobacco taxes by 4 cents per pack in 1991 and
by 4 cents per pack in 1993
1/1/91
0.6
0.8
1.5
1.5
1.5
5.9
B. Increase taxes for distilled spirits, beer and wine
1/1/91
1.8
2.8
2.9
3.0
3.1
13.6
C. Ozone-depleting chemical excise tax
1/1/91
0.1
0.1
0.1
0.1
0.1
0.5
III. Reforms and Revenue Raisers
A. Loss deductions and salvage values for insurance companies
1/1/90
0.3
0.2
0.2
0.2
0.2
1.1
B. Disallowance of deduction for interest paid on tax obligations
1/1/91
4.8
0.5
0.7
0.5
0.5
4.5
C. Adopt foreign compliance provisions including certain
provisions from H.R. 4308 (S. 2410)
3/20/90
(2)
(2)
0.1
0.1
0.1
0.3
D. Amortize insurance policy deferred acquisition expenses (DAC)
9/12/90
2.0
2.1
2.1
2.0
1.9
10.0
Page 2
Provision
Effective
1991
1992
1993
1994
1995
1991-95
IV. User Fees
A. Leaking underground storage tank (LUST) trust fund (5 years)
10/1/90
0.1
0.1
0.1
0.1
0.1
0.6
B. Increase Airport Trust Fund aviation excise taxes (5 years) (3)
(4)
1/1/91
1.3
2.3
2.5
2.7
3.0
11.8
C. Increase harbor maintenance tax (3)
(5)
1/1/91
0.3
0.3
0.4
0.4
0.4
1.8
GRAND TOTALS
12.3
10.1
11.2
12.6
13.0
59.0
Joint Committee on Taxation
NOTES: Details may not add to totals due to rounding.
Interaction between or among items has not been taken into account for the purpose of this table.
Estimates provided are consistent with the Congressional Budget Office (CBO) updated budget baseline. Additional items contained
in the President's budget proposal, relating to employment taxes and user fees, are estimated by CBO.
(1) Tax applies to specific newly-manufactured items with retail prices above the following thresholds: automobiles--$30,000; private boats
and yachts-$30,000; private aircraft under 5,000 Ibs.-no threshold; electronics-$1,000; jewelry-$5,000; and furs-$500. Tax is 10% of
purchase price in excess of thresholds.
(2) Gain of less than $50 million.
(3) Estimate is net of income tax offset.
(4) This estimate is presented relative to the CBO baseline which assumes extension of the Airport and Airway Trust Fund (AATF) taxes with
the trigger in effect. The estimate reflects the effects both of removing the trigger and of increasing the rates of certain of the AATF taxes
as proposed in the President's budget. Increased revenue to be dedicated to deficit reduction.
(5) Estimate provided by CBO.
29-Sep-90 3:58am
#90-5
PRELIMINARY
29-Sep-90
Democratic Summit Package
(R=#90-3 2
Summary of Distributional Effects, by Income Class (1)(2)
(1990 Income Levels)
Change in
Federal Taxes
Federal Taxes
Effective Tax Rates
Income Class (3)
Federal
Under
Under
Present
Taxes (1)(4)
Present Law (5)
Proposal (1)(5)
Law
Proposal
Billions
Percent
Billions
Percent
Billions
Percent
Percent
Percent
Less than $10,000
$0.0
0.0%
$14.2
1.6%
$14.2
1.6%
13.3%
13.3%
10,000 to 20,000
-1.5
-2.2%
65.8
7.6%
64.4
7.3%
15.6%
15.2%
20,000 to 30,000
2.5
2.4%
102.5
11.9%
105.0
11.9%
18.4%
18.9%
30,000 to 40,000
2.9
2.5%
115.8
13.4%
118.7
13.4%
20.0%
20.5%
40,000 to 50,000
2.4
2.7%
87.9
10.2%
90.2
10.2%
21.4%
22.0%
50,000 to 75,000
3.3
1.9%
172.8
20.0%
176.1
20.0%
24.7%
25.2%
75,000 to 100,000
1.7
2.6%
66.5
7.7%
68.2
7.7%
25.8%
26.5%
100,000 to 200,000
3.4
3.3%
104.4
12.1%
107.8
12.2%
26.2%
27.0%
200,000 and over
4.6
3.5%
133.3
15.4%
137.9
15.6%
25.2%
26.0%
Total, All Taxpayers..
$19.3
2.2%
$863.2
100.0%
$882.5
100.0%
21.8%
22.3%
(1) Distributional analysis includes effects from beer, wine, and distilled spirits taxes, tobacco tax, energy tax, capital gains indexing, taxation of social
security benefits (proposal to hit $20-billion target over FY1991-95 period), increase in HI wage cap, and an increase in the EITC.
(2) This analysis does not take into account additional taxes paid as a result of increased capital gains realizations. (See "Explanation of Methodology
Used to Estimate Proposals Affecting the Taxation of Income from Capital Gains," Staff of the Joint Committee on Taxation (JCS-12-90), March 27,
1990, pp. 46-48.)
(3) The income concept used to place tax returns into income classes is adjusted gross income plus [1] tax-exempt interest, [2] employer contributions for
health plans and life insurance, [3] inside buildup on life insurance, [4] workers' compensation, [5] nontaxable social security benefits, [6] deductible
contributions to individual retirement accounts, [7] the minimum tax preferences, and [8] net losses in excess of minimum tax preferences from passive
business activities.
(4) Estimates of total tax liability presented in distributions will not match estimated changes in receipts because of differing time periods (CY 1990 vs.
FY 1991-95), because of varying patterns of fiscal year receipts, and because changes in taxpayer behavior with respect to capital gains are not
reflected in this distribution.
(5) Distributions represent combined effects of individual income taxes, payroll taxes, Federal excise taxes, and estate and gift taxes. For the purpose of
distributions, the full burden of payroll taxes is assigned to employees. Excise taxes are assumed to be borne fully by individuals either directly through
purchase of the taxed commodity or indirectly through higher prices on all commodities as businesses pass along these added costs. Because of the
uncertainty concerning the incidence of the corporate income tax, it is excluded from this table. Information in table excludes individuals who are
dependents of other taxpayers.
THE WHITE HOUSE
WASHINGTON
September 27, 1990
Governor,
Photo Copy Preservation
Newt insisted I let you know the following:
1) If an agreement is reached, he hopes the other
summitteers will be informed of it before the President
signs off on it; and
2) He says that some reporters are saying that the White
House claims he will go along with indexing of cap gains.
He wants to be sure you are aware that indexing alone is not
enough for him absent some other powerful incentive.
FYI,
Nick
nick
PRELIMINARY DRAFT
REVENUE OPTIONS
AS SUGGESTED BY VARIOUS PARTIES
NOTE: INCLUSION OF AN OPTION
DOES NOT IMPLY SUPPORT BY ANY PARTY
REVENUE OPTIONS
Revenue estimates are preliminary and subject to change.
Interaction between proposals if combined may affect estimates.
Proposals are estimated to be effective 1/1/91
1
unless otherwise specified.
A. Revenue raising items from the Administration Budget.
NOTE: Capital gains proposals are covered in category H.
1. Airport and Airway Trust Fund.
a. Continue tax at current levels.
JCT
.9 1.6 1.7 1.8 2.0 -- 8.0
OTA
0
0
0
0
0
--
0
For baseline receipts scoring, OMB assumes that the
Airport and Airway taxes will be extended without
reduction by the trigger. CBO assumes that the
trigger will take effect for purposes of
determining its baseline. This difference accounts
for the difference in scoring.
b. Repeal trigger and increase air passenger tax to
10% (from 8%), air freight tax to 6.25% (from 5%),
the noncommercial aviation gasoline tax to
15c/gallon (from 12¢), and the noncommercial jet
fuel tax to 17.5c/gallon (from 14C).
JCT
1.3 2.3 2.5 2.7 3.0 -- 11.8
OTA
.5 .8 .9 .9 1.0 -- 4.1
As in 1a, different baseline scoring rules account
for the difference in the estimates.
2.
a. Require property and casualty companies to utilize
estimated salvage in computing losses (Budget
proposal). Effective 1/1/90.
JCT
.5 .3 .3 .2 .1 -- 1.4
OTA
.5 .3 .3 .2 .1 -- 1.4
b. Same proposal with fresh start.
JCT
.3
.2
.2
.1
.1
--
.9
OTA
.3 .2 .2 .1 .1 --
.9
2
3.
a. Allow excess pension funds to be used to pay
retiree health benefits. (Budget proposal: this
proposal is similar to the provision which passed
the House last year.)
JCT
.3
.5
.2
*
*
--
1.0
OTA
.3 .6 .3 * * -- 1.2
b.
Allow transfers from overfunded pension plans for
current year retiree health expenditures (provision
passed by Senate last year)
JCT
.6 .4 .4 .3 .3 -- 2.0
OTA
.4 .2 .1 .1 * --
.8
NOTE: In addition, there will be staff work on a
possible alternative provision.
4.
Increase ad valorem fee on shippers (Harbor Maintenance
Tax).
JCT
.3 .3 .3 .4 .4 -- 1.7
OTA
.3 .3 .3 .4 .4 -- 1.7
5.
Extend social security to state and local employees.
a.
Budget proposal.
JCT
1.6 2.3 2.4 2.6 2.8 -- 11.7
OTA
2.2 2.4 2.5 2.7 2.9 -- 12.7
b.
Budget proposal with exclusion for students.
JCT
1.3 1.9 2.1 2.2 2.4 -- 9.9
OTA
1.8 2.0 2.1 2.3 2.5 -- 10.7
Possible expenditure offsets to 5a or b:
*
Increase retirement test by $1,200
JCT
OTA
*
Other social security amendments such as those
proposed by the Ways and Means Social Security
Subcommittee not to exceed $500 million in
cost over 5 years.
3
6. Extend Medicare tax to all state and local government
employees.
JCT
1.7 1.6 1.6 1.6 1.6 -- 8.2
OTA
1.7 1.7 1.7 1.7 1.6 -- 8.4
NOTE: In addition to the foregoing, the Budget contained
the following items:
IRS management reforms
OTA
2.5 1.1 .5 * -.4 -- 3.7
Stabilize payroll tax deposit rules
OTA
.9 2.2 -3.1 * * --
*
The payroll tax proposal is important administratively
but was not considered for deficit reduction purposes.
7.
a. Make telephone excise tax permanent.
JCT
1.5 2.6 2.8 2.9 3.1 -- 12.9
OTA
1.5 2.6 2.8 3.0 3.2 -- 13.1
b. Speed up collection
JCT
.1
*
*
*
*
--
.1
OTA
.1
*
*
*
*
--
.1
NOTE: The Senate and House utilize Item 7 for Child-
related legislation.
B. Compliance proposals and LUST Fund extension.
8. Impose withholding on pension payments.
JCT
2.4 1.0 1.1 1.2 1.4 -- 7.1
OTA
3.1 1.5 1.7 2.1 2.4 -- 10.8
9.
Improve compliance for employers of household employees.
JCT
*
.1 .1 .1 .1 --
.4
OTA
*
*
*
*
*
--
*
4
10. Improve reporting by foreign-owned entities with U.S.
operations (H.R. 4308 and S. 2410)
à. Extend reporting rules adopted in 1989 (6038A) to
open years for corporations and extend rules to
branches.
JCT
*
*
.1
.1
.1
--
.3
OTA
*
*
.1
.1
.1
--
.3
b. Allow IRS to extend unilaterally statute of
limitations for foreign-owned entities.
JCT
*
*
*
*
*
--
*
OTA
*
*
*
*
--
*
11. Extend LUST fund tax. Effective 9/1/90.
a. Permanent extension with no ceiling.
JCT
.1 .1 .1 .1 .1 --
.5
OTA
.1 .1 .1 .1 .1 --
.5
b. 5-year extension with no ceiling.
JCT
.1 .1 .1 .1 .1 --
.5
OTA
.1 .1 .1 .1 .1 --
.5
C.
Permanent extension with $1.5 billion ceiling.
JCT
.1 .1 .1 .1 .1 --
.5
OTA
.1 .1 .1 .1 .1 --
.5
C. Rates.
12. 33% top rate: Eliminate 5% phase-out of 15% bracket and
exemptions, create third bracket of 33% at beginning
point of current phase-outs, limit capital gains rate to
28%.
JCT
4.0 7.9 9.0 10.2 11.4 -- 42.5
OTA
5.7 10.2 10.5 11.0 11.6 -- 49.0
13. 35% top rate: Eliminate 5% phase-outs, create third
bracket of 33% at beginning point of current phase-out,
create fourth bracket of 35% at end point of current
phase-out (assuming 2 exemptions for joint and head of
household returns), limit capital gains rate to 28%.
JCT
5.8 11.3 12.7 14.6 16.2 -- 60.4
OTA
8.0 14.2 14.8 15.5 16.3 -- 68.8
5
14. Repeal 5% phase-out (bubble): Eliminate 5% phase-out,
leaving a single top bracket of 28%.
JCT
-4.8 -9.1 -10.2 -11.3 -12.7 -- -48.2
OTA
-4.9 -8.6 -9.6 -10.4 -11.1 -- -44.5
15. Repeal'5% phase-out, modified: Eliminate 5% phase-out,
but deny personal and dependency exemptions to taxpayers
with AGI in excess of $113,000 (single) and $193,400
(joint). These thresholds will be indexed beginning in
1992.
JCT
-3.8 -7.5 -8.4 -9.3 -10.3 -- -39.3
OTA
-3.9 -6.9 -7.7 -8.3 -8.9 -- -35.7
16. 31% top rate: Eliminate 5% phase-out, create third
bracket of 31% at beginning point of current phase-out,
limit capital gains to 28%.
JCT
.5 1.2 1.4 1.7 2.0 --
6.9
OTA
1.4 2.6 2.5 2.5 2.5 -- 11.5
D.
Energy and Environmental.
17. Increase motor fuel taxes by 15c gallon. Effective
10/1/90.
Current Tax
Proposal
Gallon of gasoline
9¢
24¢
Gallon of diesel
15c
30¢
JCT
15.0 14.4 14.1 14.4 14.5 --
72.4
OTA
14.1 14.4 14.3 14.1 14.3 -- 71.2
18. Increase motor fuels taxes by 10c gallon with one-half
dedicated to deficit reduction; one-half to trust fund.
Effective 10/1/90.
Current Tax
Proposal
Gallon of gasoline
9C
19c
Gallon of diesel
15c
25¢
JCT
10.1 9.7 9.6 9.8 9.9 -- 49.1
OTA
9.5 9.7 9.7 9.6 9.8 -- 48.3
Net deficit reduction:
JCT
[Depends on outlays
OTA
from trust fund.]
6
19. Broad-based energy tax imposed on all fuels including
petroleum, natural gas, coal, and electricity generated
by hydro-electric and nuclear facilities. Exports of
such fuels would be exempt and imports would be taxed.
In addition, if the price of a manufactured product
reflects energy costs as a major component, consideration
will be given to providing that the tax would be
partially rebated upon export and an appropriate tax
imposed on imports of such product. Fuels used as
feedstocks would not be taxed. OTA effective date is
10/1/90; JCT effective date is 1/1/91.
a.
Imposed on a 5% retail price ad valorem basis,
using retail price as a base for electricity.
JCT
9.7 14.5 15.4 16.2 17.1 -- 72.9
OTA
b.
Imposed on a 5% retail price ad valorem basis,
using fuel prices to utilities as base for
electricity.
JCT
8.1 12.1 12.7 13.3 14.0 --
60.2
OTA
10.5 11.4 11.9 12.4 12.9 --
59.0
With anticipated price impact based on OTA
estimates:
Tax
Current
Implicit
price
Rates
Gasoline (gal.)
$ .053
$ 1.067
5%
Heating oil (gal.)
.032
.874
3.7%
Natural gas (000 cf)
.295
5.90
5%
Coal (short ton)
1.65
32.97
5%
Monthly residential
electric bill
.82
60.00
1.4%
C.
Imposed on a BTU-equivalent base.
JCT
10.6 15.9 16.0 16.1 16.2 --
74.9
OTA
10.9 11.7 11.9 12.1 12.3 -- 59.0
With anticipated price impact based on OTA
estimates:
Tax
Current price
Gasoline (gal.)
$ .025
$ 1.067
Heating oil (gal.)
.028
.874
Natural gas
.207
5.90
Coal
4.19
32.97
Monthly residential
electric bill
1.90
60.00
7
d. Imposed on a modified BTU base (reduced impact on
coal).
JCT
OTA
10.9 11.7 11.9 12.1 12.3 -- 59.0
with anticipated price impact based on OTA
estimates:
Tax
Current price
Gasoline (gal.)
$ .030
$ 1.067
Heating oil (gal.)
.033
.874
Natural gas
.243
5.90
Coal
1.81
32.97
Monthly residential
electric bill
2.23
60.00
20. Impose oil import fee of $5/barrel with exemption for
Canada capped at average imports between 1985-1988.
JCT
6.4 8.3 8.3 8.7 9.3 -- 41.0
OTA
6.9 9.0 9.3 9.6 9.8 -- 44.6
21. Impose tax on lead. Current price, approximately
$.50/pound. Effective 10/1/90.
a.
$.50 per pound.
JCT
.6 .9 .8 .7 .6 -- 3.6
OTA
.6 .8 .8 .7 .7 -- 3.6
b. $1.00 per pound.
JCT
1.2 1.7 1.3 1.1 .8 --
6.1
OTA
1.1 1.4 1.2 1.0 .9 -- 5.6
C.
$1.25 per pound.
JCT
1.5 2.0 1.5 1.1 .8 -- 6.9
OTA
1.3 1.7 1.4 1.2 1.0 -- 6.6
22. Impose $7 per ton tax on virgin newsprint. Effective
10/1/90.
JCT
*
*
*
*
*
--
*
OTA
*
*
*
*
*
--
*
8
NOTE: Due to baseline conventions of OMB and cBo,
reauthorization of the Superfund will not be scored as
raising revenue in the budget period.
NOTE: In addition, staff inquiries are underway to
determine whether other chemicals should be added to the
CFC excise enacted last year.
E. Other Excise Taxes.
23. Tobacco. Effective 10/1/90.
a. Double all existing tobacco taxes (e.g., cigarettes
from 16c to 32¢ per pack).
JCT
2.8 3.0 3.0 2.9 2.9 -- 14.6
OTA
2.6 2.8 2.7 2.7 2.7 -- 13.5
b. Double existing tax and index commencing 1992.
JCT
3.0 3.5 3.7 3.9 4.2 -- 18.3
OTA
2.7 3.0 3.3 3.6 4.2 -- 16.8
C. Index tobacco taxes from current levels commencing
1991.
JCT
.1
.2
.3
.4
.6
--
1.6
OTA
.1 .2 .2 .2 .3 -- 1.0
24. Alcoholic Beverages. Effective 10/1/90.
a. CBO Report option: increase distilled spirits tax
from $12.50/gallon to $16/gallon (25 cents/oz.) and
impose equivalent tax by alcohol content on beer
and wine.
JCT
7.2 7.3 7.4 7.6 7.6 -- 37.1
OTA
6.4 6.8 6.9 7.0 7.0 -- 34.1
Impact on price of:
Current tax
Option
6 pack of beer
$ .16
$ .72
Bottle of table wine
$ .03
$ .90
Bottle of distilled
spirits
$2.00
$2.56
9
b.
Increase $12.50/gallon rate on distilled spirits to
$15.00/gallon (increases tax as if indexed from
1985 when last increased).
JCT
.4 .5 .5 .5 .5 -- 2.4
OTA
.5 .5 .5 .6 .6 -- 2.7
Impact on price of:
Current tax
Option
Bottle of distilled
spirits
$2.00
$2.40
C. Double current tax on beer and wine.
JCT
1.4 1.5 1.5 1.5 1.5 --
7.4
OTA
1.4 1.5 1.5 1.5 1.5 --
7.4
Impact on price of:
Current tax
Option
6 pack of beer
$ .16
$ .32
Bottle of table wine
$ .03
$ .06
d. Double current tax on beer and wine and index them
until they reach level of tax on distilled spirits
imposed on an alcohol equivalent basis.
JCT
1.5 1.7 1.8 1.9 2.1 --
9.0
OTA
1.4 1.6 1.7 1.8 1.9 --
8.4
Impact on price of:
Current tax
Option
(1991)
6 pack of beer
$ .16
$ .32
Bottle of table wine
$ .03
$ .06
25. Impose a securities transfer excise tax (STET). The base
proposal would exempt original issues of all securities
and Treasury and state and local bonds. Other exemptions
for agricultural commodities and short-term money-market
instruments are being considered. Effective 10/1/90.
a. .003 rate
JCT
4.2 6.1 6.4 6.8 7.1 -- 30.6
OTA
5.6 7.4 8.2 8.5 9.0 -- 38.7
b. .0015 rate
JCT
2.1 3.1 3.2 3.4 3.6 -- 15.4
OTA
3.5 4.9 5.4 5.6 5.9 -- 25.3
10
F.
Luxury Excise Taxes. Effective 10/1/90.
26. Tax 10% of the purchase price, net of threshholds:
Automobiles - $25,000
Boats and yachts - $25,000
Furs - $500
Private aircraft - no threshhold.
JCT
.5
.6
.6
.7
.8
--
3.2
OTA
.5
.6
.6
.7
.7
--
3.1
27. Tax 10% of the purchase price, net of threshholds:
Automobiles - $30,000
Boats and yachts - $30,000
Electronics - $1,000
Jewelry - $1,000
Furs - $500
JCT
1.2 1.9 2.1 2.2 2.2 -- 9.6
OTA
1.1 1.8 1.9 2.0 2.1 -- 8.9
G.
Itemized Deductions.
28. Impose a limit on the amount of deductible state and
local income taxes.
a.
$15,000 limit.
JCT
.8 5.4 5.6 6.2 6.8 -- 24.8
OTA
1.5 5.0 4.6 5.0 5.4 -- 21.5
b. $10,000 limit.
JCT
1.0 6.6 6.8 7.5 8.3 -- 30.1
OTA
1.9 6.5 6.0 6.5 7.0 -- 27.9
C.
$5,000 limit.
JCT
1.4 9.4 9.6 10.5 11.6 -- 42.5
OTA
3.0 10.1 9.4 10.3 11.3 -- 44.1
29. Impose a floor on deduction of state and local income
taxes.
a. 1% of adjusted gross income.
JCT
.6 4.1 3.3 3.5 3.8 -- 15.2
OTA
1.6 4.8 3.4 3.6 3.8 -- 17.2
11
b. 2% of adjusted gross income.
JCT
1.2 7.8 6.8 7.4 7.9 -- 31.0
OTA
3.1 9.7 7.7 8.1 8.5 -- 37.1
30. Reduce deduction for total itemized deductions by 10% of
modified adjusted gross income (AGI) in excess of
$100,00b.
+ 5% add bach
JCT
1.7 11.4 11.7 12.9 14.1 --
51.7
OTA
4.2 15.0 15.0 16.5 17.9 --
68.8
of
31. Impose a limit on total itemized deductions.
a.
$100,000 limit.
JCT
1.2 7.8 8.3 9.1 9.9 -- 36.3
OTA
1.9 6.8 5.7 5.6 5.6 -- 25.4
b.
$75,000 limit.
JCT
1.4 9.2 9.8 10.6 11.7 -- 42.0
OTA
2.5 8.5 7.6 7.6 7.6 -- 33.8
C.
$50,000 limit.
JCT
1.8 11.8 12.7 13.9 15.2 -- 55.4
OTA
3.6 12.4 11.2 11.3 11.4 -- 50.0
d.
$25,000 limit.
JCT
3.0 19.9 21.1 23.0 25.0 -- 92.0
OTA
7.0 24.0 22.1 22.4 22.6 -- 98.1
32. Include employer's cost of medical insurance above
$250/$100 per month cap in income if wages exceed
$100,000.
JCT
.2 .4 .4 .5 .6 -- 2.1
OTA
.2 .4 .4 .5 .6 -- 2.1
33. Include employer's cost of group term life insurance in
income if wages exceed $100,000.
JCT
.1 .1 .1 .1 .1 --
.5
OTA
.1 .1 .1 .1 .1 --
.5
12
34. Reduce maximum loan for home equity indebtedness
deduction from $100,000 to $50,000. Effective 7/16/90.
Grandfather existing loans.
JCT
*
.1
.2
.2
.2
--
.7
OTA
*
* * .1 .1 --
.3
H. Business Deductions.
35. Reduce deduction for business meals and entertainment
from 80% to 50% of costs.
JCT
2.0 3.4 3.6 3.9 4.1 -- 17.0
OTA
2.1 3.7 3.9 4.2 4.5 -- 18.4
36. CBO Advertising option: Require amortization of 20% of
advertising costs over 4 years (remaining 80% would
continue to be currently deductible).
JCT
2.9 4.8 3.7 2.4 1.5 -- 15.3
OTA
3.6 5.1 3.5 2.1 1.2 -- 15.5
37. Require life insurance companies to amortize policy
acquisition costs over 10 years. 5-year phase-in. (This
proposal is sometimes referred to as "deferred
acquisition cost" or "DAC".)
JCT
.7 2.0 3.2 4.5 5.7 -- 16.1
OTA
.7 1.9 3.1 4.3 5.6 -- 15.6
NOTE: The staffs have been directed to make sure that
this proposal fairly taxes both segments of the life
insurance industry.
I. Capital Gains and Other Savings and Investment Proposals
(unless otherwise stated, all capital gains proposals are
estimated effective 10/1/90).
38. Budget proposal: 30% exclusion for individual assets
held 3 years, 20% exclusion for individual assets held 2
years, 10% exclusion for individual assets held 1 year,
phased in.
JCT
3.6 -4.2 -3.5 -4.3 -3.1 -- -11.5
OTA
4.9 2.8 1.2 1.7 1.4 -- 12.0
13
39. a. Allow 30% exclusion for individual capital assets
held more than 1 year or indexing for inflation
after 12/31/90.
JCT
4.1 -2.4 -3.0 -4.9 -5.5 -- -11.7
OTA
3.3 2.3 -.4 -1.9 -2.1 -- 1.2
b.
Same exclusion for corporate assets.
JCT
-.9 -1.5 -1.6 -1.6 -1.7 -- -7.3
OTA
-.3 -1.0 -1.4 -1.8 -2.0 -- -6.5
40. a. Allow 30% exclusion for individual capital assets
held more than 1 year and indexing for inflation
after 12/31/90.
JCT
4.0 -3.3 -4.4 -7.0 -8.2 -- -18.9
OTA
2.2 1.2 -1.6 -5.6 -6.9 -- -10.7
b.
Same exclusion for corporate assets.
JCT
-.9 -1.8 -1.8 -1.9 -2.2 --
-8.6
OTA
-.3 -1.0 -1.9 -2.7 -3.2 --
-9.1
41.
a. Allow a 5% exclusion for each year of holding on
individually-held capital assets to maximum of 7
years (i.e., maximum exclusion, 35%) or indexing
for inflation occurring after 12/31/91 on assets
held at least 2 years.
JCT
2.3 -1.2 -1.8 -3.6 -4.4 --
-8.7
OTA
2.2 2.8 1.9 .6 -.1 --
7.4
b.
Allow a 1% rate reduction for corporate assets for
each 3 years held to a maximum of 15 years, 5%.
JCT
-.7 -.7 -.8 -.8 -.9 --
-3.9
OTA
-.2 -.3 -.4 -.5 -.5 -- -1.9
42. Allow indexing of basis for inflation occurring after
12/31/91 for individual assets held at least 1 year.
JCT
*
* -.3 -1.5 -2.7 --
4.5
OTA
.2 -.1 -1.1 -1.8 -1.9 --
-4.7
43. Allow a 15% exclusion for individual assets held at least
1 year.
JCT
1.3 -.7 -.8 -1.0 -1.2 -- -2.4
OTA
2.2 2.8 1.8 1.4 1.2 -- 9.4
14
44. Allow a 20% exclusion for individual assets held at least
2 years, phased in.
JCT
1.4 -1.0 -1.4 -1.6 -1.6 -- -4.2
OTA
2.2 1.2 1.6 1.1 .9 --
7.0
-
45. Allow a 30% exclusion for individual assets held at least
3 years, phased in.
A
JCT
OTA
3.2 .6 -.1 1.2 .5 -- 5.4
46. Allow a 45% exclusion for individual assets held at least
1 year.
JCT
3.7 -3.2 -5.6 -8.1 -8.3 -- -21.5
OTA
3.7 2.3 -.2 -1.9 -3.1 --
.8
47. Allow a lifetime exclusion of $125,000 in capital gains
for assets held at least 3 years (would not affect
existing exclusion for residence sales by those over 55).
JCT
-7.5 -5.4 -4.1 -3.6 -3.5 -- -24.1
OTA
-4.7 -14.1 -4.9 -4.8 -4.7 -- -33.1
48. Tax capital gains of foreign shareholders in U.S.
corporations with 10% or greater interest (H.R. 4308 and
S.2410 provision).
JCT
.1
.2
.2
.2
.1 --
.8
OTA
.1
.2
.2
.2
.1 --
.8
49. Impose a 10% excise tax on gains recognized on securities
held less than 30 days, 5% excise tax on gains recognized
from securities held 30 days or more days and less than
6 months.
JCT
*
.2
.5
.5
.6
--
1.8
OTA
*
.7 1.1 1.3 1.4 -- 4.5
50. Allow IRA contributions of up to $2,000 per year for
those taxpayers currently ineligible of which one-half
would be currently deductible. Allow withdrawal without
penalty for first-time home purchase or education.
JCT
-1.2 -3.3 -3.8 -4.3 -4.9 -- -17.4
OTA
-.7 -3.4 -3.8 -4.1 -4.5 -- -16.4
15
51. Administration family savings account proposal: Allow
contributions of up to $2,500 ($5,000 family) per year
for taxpayers with AGI of less than $120,000 joint,
$100,000 head of household, $60,000 single.
Distributions would be tax-free if held in account for 7
years or more.
JCT
-.2 -.6 -1.0 -1.3 -1.8 --
-5.0
OTA
-.2 -.7 -1.0 -1.3 -1.7 -- -4.9
52. Restore pre-1986 IRAs.
JCT
-2.5 -7.1 -8.0 -9.1 -10.2 -- -36.9
OTA
-1.0 -5.0 -5.9 -6.4 -6.9 -- -25.2
53. Allow withdrawal without penalty from IRAs for first-time
home purchase or education.
JCT
OTA
-.4 -.5 -.5 -.4 -.4 -- -2.2
54. Allow up to $10,000 withdrawal without penalty from IRA
for first-time home purchase if price of home does not
exceed median price in area (Budget proposal).
JCT
-.2
-.2 -.2 -.1 -.1 --
-.9
OTA
*
-.1 -.1 -.1 -.1 -- -.4
55. IRA/FSA Combination:
a. Allow taxpayers the option of:
*
contributing up to $1,000 annually to an IRA of
which 50% would be deductible if above current IRA
limits or
*
contributing up to $1,250 ($2,500 family) to a
family savings account with the same rules as
option 55.
Both alternatives would be available only to taxpayers
with AGI of less than $100,000 joint, $80,000 head of
household, and $50,000 single.
JCT
OTA
-.5 -1.2 -1.3 -1.4 -1.6 -- -6.0
16
b. Allow taxpayers the option of:
*
contributing up to $2,000 annually to an IRA of
which 50% would be currently deductible if above
current IRA limits or
*
contributing up to $2,000 to an FSA ($4,000 family)
of which 50% of interest would be taxable on
withdrawal after 7 years.
JCT
OTA
-.5 -2.5 -2.8 -3.0 -3.3 -- -12.1
c.
Allow taxpayers the option of:
*
full deduction for up to $2,000 contribution to an
IRA (i.e., restore pre-1986 law) or
*
$2,000 contribution to family savings account
($4,000 family).
Delagited
JCT
afflots
OTA
-.9 -4.9 -5.4 -5.9 -6.2 --
-23.3
56. Increase current law IRA phase-outs.
a. $10,000 increase.
JCT
-.3 -.7 -.8 -.8 -.8 --
-3.4
OTA
-.2 -.8 -1.0 -1.0 -1.2 --
-4.2
b. $25,000 increase.
JCT
OTA
-.4 -1.9 -2.1 -2.3 -2.3 --
-9.0
57. Enterprise zones: Administration budget proposal.
JCT analysis concluded that the Administration
proposal was too unspecified to estimate with
confidence.
OTA
-.1 -.2 -.3 -.5 -.8 -- -1.9
17
58. Enterprise zones: H.R. 5190.
JCT
* -.2 -.4 -.6 -.8 --
-2.0
OTA
* -.2 -.4 -.6 -.8 --
-2.0
NOTE: In addition to the foregoing, small business
investment incentives (including estate freezes), energy
tax incentives, disability provisions, and similar
proposals may be considered in the course of the
legislative process.
J. Low income relief provisions: To address progressivity
concerns, various low-income relief provisions may need to be
considered. Since these will have to be tailored to meet an
emerging package, specific proposals are not described here
but could be expected to include expansions of the earned
income tax credit, direct rebates, standard deduction
increases, or reductions in low-end thresholds or rates. For
illustrative purposes, the EITC provisions of the House and
Senate child care bills are included here:
59. House: Under the House proposal, the earned income tax
credit (EITC) would be expanded to include adjustments
for family size and the presence of young children.
Using the present law income breakpoints, the credit rate
would be increased according to the number of eligible
children in the family as follows:
Number of
Credit
Phaseout
Projected
Children
Percentage
Percentage
Maximum Amount
1
17%
12%
$1,211
2
21%
15%
$1,496
3
25%
18%
$1,780
Families would also be entitled to a supplemental credit
equal to six percent of earned income (maximum credit:
$427) if they have children under the age of six. The
House bill would also phase-out the child and dependent
care credit for families with incomes above $70,000.
a. EITC - Family Size Adjustment.
JCT
-.3 -2.9 -3.1 -3.4 -3.6 -- -13.3
OTA
-.3 -3.1 -3.3 -3.5 -3.7 -- -14.1
b. EITC - Young Child Supplement.
JCT
-.1 -1.1 -1.2 -1.3 -1.4 -- -5.2
OTA
-.1 -1.3 -1.4 -1.5 -1.6 -- -6.0
18
C. Phase-out Child and Dependent Care.
JCT
.1 .3 .3 .4 .5 -- 1.5
ÒTA
.1 .3 .4 .4 .4 -- 1.6
60. Senate: First, a young child supplement would be added
to the EITC for families with children under the age of
4 and incomes less than $15,000 (maximum credit of $750
if 2 or more children under age 4; $500 if one child).
Second, the child and dependent care credit would be made
90% refundable. Third, families with income less than
$18,000 could be entitled to a 50% credit for health
insurance expenditures, up to a maximum credit of $500.
a. EITC.
JCT
-.1 -.6 -.7 -.7 -.8 -- -2.8
OTA
-.1 -.8 -.9 -.9 -1.0 -- -3.6
b. Child and dependent care tax credit.
JCT
-.1 -1.1 -1.1 -1.2 -1.3 --
-4.9
OTA
* -.9 -1.0 -1.0 -1.0 -- -4.0
C. Medical insurance credit.
JCT
* -.6 -.6 -.7 -.8 -- -2.9
OTA
*
-.4 -.5 -.6 -.6 -- -2.2
K. Expiring provisions. Except for item 65, all restore last
year's sequester. Except for the R&E allocation rules, all
are effective commencing 1/1/91. The R&E allocation rules are
effective for tax years beginning after 8/1/90.
61. Permanent extension.
a. Employer-provided educational assistance.
JCT
-.3 -.3 -.3 -.4 -.4 -- -1.7
OTA
-.3 -.3 -.4 -.4 -.4 -- -1.8
b. Group legal services.
JCT
-.1 -.1 -.1 -.1 -.1 --
-.5
OTA
-.1 -.1 -.1 -.1 -.1 --
-.5
C. Health insurance for self-employed.
JCT
-.3 -.3 -.4 -.4 -.5 -- -1.8
OTA
-.2 -.4 -.5 -.5 -.6 -- -2.2
19
d. Mortgage revenue bonds.
JCT
*
-.1 -.1 -.2 -.3 --
-.8
OTA
*
-.1 -.1 -.2 -.3 --
-.7
e.
Small-issue manufacturing bonds.
JCT
*
-.1 -.1 -.2 -.3 --
-.6
OTA
-.1 -.1 -.2 -.2 --
-.6
f. R&E allocation rules.
JCT
-.5 -.7 -.8 -.8 -.9 --
3.7
OTA
-.4 -.7 -.8 -.8 -.9 -- -3.6
g. R&E tax credit.
JCT
-.9 -1.2 -1.3 -1.4 -1.6 --
-6.4
OTA
-.5 -1.0 -1.1 -1.3 -1.6 --
-5.5
h.
Low-income housing credit.
JCT
-.2 -.4 -.7 -1.1 -1.4 -- -3.7
OTA
-.1 -.4 -.7 -1.0 -1.4 -- -3.6
i.
Targeted jobs tax credit.
JCT
-.1 -.2 -.3 -.4 -.4 -- -1.4
OTA
-.1 -.2 -.3 -.3 -.4 -- -1.3
j.
Business energy credits.
JCT
-.1 -.1 * * * -- -.2
OTA
-.1 -.1 * * * -- -.2
k. Placed-in-service date for nonconventional fuels
(section 29).
JCT
*
*
*
*
*
--
*
OTA
*
*
*
*
*
--
-.1
1. Orphan drug testing credit.
JCT
*
*
*
*
*
--
*
OTA
*
*
*
*
*
--
*
TOTALS: JCT
-2.2 -3.2 -4.1 -4.9 -5.7 -- -20.3
OTA
-1.8 -3.4 -4.1 -4.8 -5.9 -- -19.9
20
62. Permanent, no restoration of last year's sequester.
a. Employer-provided educational assistance.
JCT
-.2 -.3 -.3 -.4 -.4 --
-1.6
OTA
-.2 -.3 -.3 -.4 -.4 -- -1.6
b. Group legal services.
JCT
-.1 -.1 -.1 -.1 -.1 --
-.5
OTA
-.1 -.1 -.1 -.1 -.1 --
-.5
C. Health insurance for self-employed.
JCT
-.2 -.3 -.4 -.4 -.5 -- -1.7
OTA
-.1 -.4 -.5 -.5 -.6 --
-2.1
d. Mortgage revenue bonds.
JCT
*
*
-.1 -.2 -.3 --
-.6
OTA
* -.1 -.1 -.2 -.3 -- -.7
e.
Small-issue manufacturing bonds.
JCT
*
*
-.1
-.2
-.3
--
-.6
OTA
*
-.1 -.1 -.2 -.2 --
-.6
f. R&E allocation rules.
JCT
-.5 -.7 -.8 -.8 -.9 -- -3.6
OTA
-.4 -.7 -.8 -.8 -.9 -- -3.6
g. R&E tax credit.
JCT
-.5 -1.0 -1.2 -1.3 -1.6 --
-5.6
OTA
-.5 -.8 -1.0 -1.3 -1.7 --
-5.3
h. Low-income housing credit.
JCT
-.1 -.3 -.6 -1.0 -1.3 -- -3.4
OTA
-.1 -.3 -.6 -.9 -1.3 -- -3.2
i. Targeted jobs tax credit.
JCT
-.1 -.2 -.3 -.4 -.4 -- -1.3
OTA
-.1 -.2 -.3 -.3 -.4 -- -1.3
j. Business energy credits.
JCT
*
-.1 *
*
*
--
-.2
OTA
*
-.1 *
*
*
--
-.2
21
k.
Placed-in-service date for nonconventional fuels
(section 29).
JCT
*
*
*
*
*
--
-.1
OTA
*
*
*
*
*
--
-.1
1. Orphan drug testing credit.
JCT
*
*
*
*
*
--
*
OTA
*
*
*
*
*
--
*
TOTALS: JCT
-1.4 -2.8 -3.8 -4.7 -5.7 --
-18.6
OTA
-1.5 -3.1 -3.8 -4.7 -5.9 --
-19.0
63. 3-year extension.
a. Employer-provided educational assistance.
JCT
-3. -.3 -.3 -.1 *
--
-1.0
OTA
-.3 -.3 -.3 -.1 *
--
-1.0
b.
Group legal services.
JCT
-.1 -.1 -.1 *
*
--
-.3
OTA
-.1 -.1 -.1 *
*
--
-.3
C.
Health insurance for self-employed.
JCT
-.3 -.3 -.4 -.1 *
--
-1.1
OTA
-.2 -.4 -.5 -.3 *
--
-1.4
d. Mortgage revenue bonds.
JCT
*
*
-.1
-.2
-.1
--
-.4
OTA
*
-.1 -.2 -.1 -.1 --
-.5
e.
Small-issue manufacturing bonds.
JCT
*
*
-.1 -.2 -.2 --
-.5
OTA
*
-.1 -.1 -.1 -.1 --
-.4
f.
R&E allocation rules.
JCT
-.5 -.7 -.8 -.3 * --
-2.3
OTA
-.5 -.7 -.8 -.3 * --
-2.3
g.
R&E tax credit
JCT
-.9 -1.2 -1.3 -.7 -.3 --
-4.4
OTA
-.6 -.8 -1.1 -.7 -.3 --
-3.5
22
h.
Low-income housing credit.
JCT
-.2 -.4 -.7 -1.0 -1.1 -- -3.3
OTA
-.1 -.4 -.7 -1.0 -1.1 -- -3.3
i. Targeted jobs tax credit.
JCT
-.1 -.2 -.3 -.3 -.2 --
-1.1
OTA
-.1 -.2 -.3 -.2 -.1 --
-.9
j.
Business energy credits.
JCT
-.1 -.1 *
*
*
--
-.2
OTA
-.1 -.1 *
*
*
--
-.2
k. Placed-in-service date for nonconventional fuels
(section 29).
JCT
*
*
*
*
*
--
-.1
OTA
*
*
*
*
*
--
-.1
1. Orphan drug testing credit.
JCT
*
*
*
*
*
--
*
OTA
*
*
*
*
*
--
*
TOTALS: JCT
-2.2 -3.1 -4.0 -3.4 -2.8 -- -15.7
OTA
-2.0 -3.2 -4.1 -2.8 -1.7 -- -13.7
64. 5-year extension.
a.
Employer-provided educational assistance.
JCT
-.3 -.3 -.3 -.4 -.4 --
-1.7
OTA
-.3 -.3 -.4 -.4 -.4 -- -1.8
b.
Group legal services.
JCT
-.1 -.1 -.1 -.1 -.1 --
-.5
OTA
-.1 -.1 -.1 -.1 -.1 --
-.5
C.
Health insurance for self-employed.
JCT
-.3 -.3 -.4 -.4 -.5 -- -1.8
OTA
-.2 -.4 -.5 -.5 -.6 --
-2.2
d.
Mortgage revenue bonds.
JCT
*
-.1 -.1 -.2 -.3 --
-.8
OTA
*
-.1 -.1 -.2 -.3 --
-.7
23
e.
Small-issue manufacturing bonds.
JCT
* -.1 -.1 -.2 -.3 --
-.6
OTA
* -.1 -.1 -.2 -.2 --
-.6
f.
R&E allocation rules.
JCT
-.5 -.7 -.8 -.8 -.9 --
3.7
OTA
-.4 -.7 -.8 -.8 -.9 --
-3.6
g. R&E tax credit.
JCT
-.9 -1.2 -1.3 -1.4 -1.6 --
-6.4
OTA
-.5 -1.0 -1.1 -1.3 -1.6 --
-5.5
h.
Low-income housing credit.
JCT
-.2 -.4 -.7 -1.1 -1.4 -- -3.7
OTA
-.1 -.4 -.7 -1.0 -1.4 --
-3.6
i.
Targeted jobs tax credit.
JCT
-.1 -.2 -.3 -.4 -.4 -- -1.4
OTA
-.1 -.2 -.3 -.3 -.4 -- -1.3
j.
Business energy credits.
JCT
-.1 -.1 * * * -- -.2
OTA
-.1 -.1 *
*
*
--
-.2
k.
Placed-in-service date for nonconventional fuels
(section 29).
JCT
*
*
* *
*
*
*
--
*
OTA
*
*
*
*
--
-.1
1.
Orphan drug testing credit.
JCT
*
*
*
*
*
--
*
OTA
*
*
*
*
*
--
*
TOTALS: JCT
-2.2 -3.2 -4.1 -4.9 -5.7 -- -20.3
OTA
-1.8 -3.4 -4.1 -4.8 -5.9 -- -19.9
65. Extend FUTA surtax. Effective 1/1/91.
JCT
.7 1.1 1.1 1.1 1.2 -- 5.2
OTA
.8 1.1 1.1 1.2 1.2 -- 5.4
Proporal 3PM
ner Rainers:
agreed
45.4
IRS
9.4
petire Health
1.3
S fatil Cocal HI
5.2
alrohol
12.2
Business coopboler
2.0
75.5
60 day index delay
12.2
Limit Deduction 5%
18.0
Energy
42.3
148.0
Ren were:
Energy
3.5
L Inc+RD for 1gr
2.0
Small Businer
8.0
Indexing
4.5
- 18.0
September 19, 1990
H.R. 3, the Early Childhood Education and Development Act of 1989
Possible offer
(in billions)
5-year total
Child Care
Direct grants for child care (modified Senate offer
1.7
using Title IV-A in lieu of Title XX)
Expand EITC and adjust for family size (drop
11.0
young child supplement)
Authorize health credit for families with children
1.5
SUBTOTAL
14.2
Extend telephone excise tax
-13.0
Phase out dependent care tax credit and eliminate
section 129 exclusion for higher income families
-1.5
SUBTOTAL
-14.5
Social Security
Subcommittee package (excluding retirement test
0.5
increase)
$1,200 increase in retirement test
1.5
Eliminate 7-year rule for disabled widows
negligible
Increase widows' benefits by reducing actuarial
4.0
reduction
Increase SSI benefits by $20 for individuals and
4.0
$30 for couples
SUBTOTAL
10.0
Cover state and local workers (excluding students) not
covered by a public retirement plan
-10.0
SUBTOTAL
-10.0
Distributional Impact
Administration Plan
Percent Change in Tax Liability
2
1
0
-1
-2
-3
-4
-5
- 5.2%
-6
0-10
10-20
20-30
30-40
40-50
50-75
75-100
100-200
200
plus
Income Classes (Thousands of $)
Source: Joint Committee on Taxation
Distributional Impact
Administration Plan
5- Year Change in Income (Thousands of $)
40
$35,530
30
20
10
$3,860
0
- $235 - $865 - $1,055 - $1,135 - $1,090 - $595
-10
Lowest Second Middle Fourth 81-90% 91-95% - 96-99% Top 1%
Income Classes (Quintiles)
Note: The average income of the top 1%
Source: Congressional Budget Office
is $428,044
Distributional Impact
Administration Plan
Average 5-Year Tax Change (Thousands)
5
$262.05
$292.30
$362
0
- $39.05
- $35.60
- $80.15
- $972.50
-5
- $4,945.75
-10
-15
-20
-25
-30
- $30,210.15
-35
0-10
10-20
20-30
30-40
40-50
50-75
75-100
100-200
200
plus
Income Classes (Thousands of $)
Distributional Impact
Administration Plan
Change in Income
8
+ $7,106
6
4.
+ $772
2
0
-$47
-$173
-211
-227
-218
-119
-2
Lowest Second Middle Fourth 81-90% 91-95% 96-99% Top 1%
Income Classes (Quintiles)
Note: The average Income of the top 1%
Source: Congressional Budget Office
is $428,044
Distributional Impact
Democratic Plan
Percent Change in Tax Liability
20
15
10
5
0
-5
0-10
10-20
20-30
30-40
40-50
50-75
75-100
T
100-200
200
plus
Income Classes (Thousands of $)
Source: Joint Committee on Taxation
Federal Tax Increase Due to a $10,000 Cap on the Deduction for State and Local Income Taxes
and Capital Gains Realizations in 1988, Ranked by State
Families with Tax Increase from Cap
Capital Gains Realizations in 1988
Families with Cap
Tax Increase
Returns with Gains
Capital Gains
Number
Percent
Amount
Percent
Number
Percent
Amount
Percent
State
(000)
of Total
($ M) of Total
State
(000)
of Total
($ M) of Total
New York
268
24.3
1,619
32.7
California
1,550
12.3
24,808
16.3
California
225
20.4
1,155
23.3
New York
959
7.6
14,753
9.7
Connecticut
32
2.9
227
4.6
Florida
829
6.6
13,466
8.8
New Jersey
45
4.1
208
4.2
Texas
717
5.7
8,954
5.9
Ohio
46
4.2
175
3.5
Illinois
603
4.8
7,637
5.0
Massachussetts
47
4.3
167
3.4
New Jersey
472
3.7
7,068
4.6
Michigan
35
3.2
115
2.3
Pennsylvania
541
4.3
5,913
3.9
Maryland
32
2.9
95
1.9
Massachussetts
328
2.6
4,959
3.3
Wisconsin
30
2.7
90
1.8
Ohio
475
3.8
3,994
2.6
Oklahoma
14
1.3
89
1.8
Virginia
302
2.4
3,311
2.5
North Carolina
29
2.6
82
1.7
Connecticut
222
1.8
3,751
2.5
Minnesota
35
3.2
82
1.7
Georgia
242
1.9
3,398
2.2
Illinois
26
2.4
77
1.6
Michigan
468
3.7
3,306
2.2
Pennsylvania
25
2.3
74
1.5
North Carolina
269
2.1
3,207
2.1
Florida
13
1.2
62
1.3
Maryland
236
1.9
3,125
2.1
Oregon
19
1.7
58
1.2
Washington
308
2.4
2,898
1.9
Georgia
19
1.7
58
1.2
Wisconsin
299
2.4
2,700
1.8
Kansas
14
1.3
57
1.2
Tennessee
174
1.4
2,482
1.8
Virginia
15
1.4
54
1.1
Minnesota
291
2.3
2,201
1.4
D.C
7
0.6
32
0.6
Arizona
207
1.6
2,175
1.4
South Carolina
10
0.9
29
0.6
Missouri
273
2.2
2,118
1.4
Iowa
10
0.9
28
0.6
Colorado
220
1.7
1,908
1.3
Arkansas
5
0.5
24
0.5
Indiana
237
1.9
1,889
1.2
Delaware
9
0.8
21
0.4
Nevada
60
0.5
1,380
0.9
West Virginia
8
0.7
21
0.4
Oregon
183
1.5
1,348
0.9
Nebraska
5
0.5
20
0.4
Alabama
128
1.0
1,289
0.8
Indiana
6
0.5
20
0.4
Kansas
147
1.2
1,232
0.8
Arizona
6
0.5
19
0.4
Kentucky
132
1.0
1,226
0.8
Missouri
6
0.5
19
0.4
New Hampshire
64
0.5
1,213
0.8
Kentucky
7
0.6
18
0.4
South Carolina
121
1.0
1,163
0.8
Alabama
7
0.6
18
0.4
Other
108
0.9
1,135
0.7
Colorado
8
0.7
18
0.4
Louisiana
131
1.0
944
0.6
Hawaii
6
0.5
17
0.3
Iowa
187
1.5
941
0.6
Rhode Island
4
0.4
13
0.3
Hawaii
60
0.5
925
0.6
Idaho
3
0.3
10
0.2
Oklahoma
133
1.1
875
0.6
Louisiana
3
0.3
10
0.2
Arkansas
95
0.8
798
0.5
Texas
5
0.5
10
0.2
Rhode Island
48
0.4
701
0.5
Mississippi
4
0.4
9
0.2
D.C
29
0.2
699
0.5
Maine
3
0.3
9
0.2
Maine
57
0.5
695
0.5
Vermont
2
0.2
7
0.1
Nebraska
102
0.8
631
0.4
New Mexico
2
0.2
7
0.1
Mississippi
68
0.5
566
0.4
Montana
3
0.3
6
0.1
New Mexico
70
0.6
523
0.3
New Hampshire
1
0.1
5
0.1
Utah
77
0.6
498
0.3
Washington
*
0.0
3
0.1
Vermont
35
0.3
459
0.3
Nevada
*
0.0
3
0.1
West Virginia
51
0.4
401
0.3
Tennessee
1
0.1
3
0.1
Idaho
58
0.5
397
0.3
Utah
1
0.1
2
0.0
Delaware
34
0.3
365
0.2
Other
*
0.0
1
0.0
Montana
60
0.5
349
0.2
North Dakota
*
0.0
1
0.0
South Dakota
53
0.4
329
0.2
Alaska
*
0.0
*
0.0
Wyoming
28
0.2
240
0.2
Wyoming
0.0
*
0.0
North Dakota
44
0.3
216
0.1
South Dakota
*
0.0
*
0.0
Alaska
29
0.2
161
0.1
Total
1,101
100.0
4,947
100.0
Total
12,614
100.0
152,220
100.0
September 15, 1990
* Less than 500 families or returns, or less than $500,000.
Note: Families and returns are shown by state in which return filed.
Federal Tax Increase Due to a $10,000 Cap on the Deduction for State and Local Income Taxes
and Capital Gains Realizations in 1988, Ranked by State
(Rank by Capital Gains)
Families with Tax Increase from S&L Tax Cap
Capital Gains Realizations in 1988
Families with Cap
Federal Tax Increase
Returns with Gains
Capital Gains
Number
Percent
Amount
Percent
Number
Percent
Amount
Percent
State
(000)
of Total
($ M)
of Total
Rank
(000)
of Total
($
M)
of Total
Rank
California
225
20.4
1,155
23.3
2
1,550
12.3
24,808
16.3
1
New York
268
24.3
1,619
32.7
1
959
7.6
14,753
9.7
2
Florida
13
1.2
62
1.3
15
829
6.6
13,466
8.8
3
Texas
5
0.5
10
0.2
37
717
5.7
8,954
5.9
4
Illinois
26
2.4
77
1.6
13
603
4.8
7,637
5.0
5
New Jersey
45
4.1
208
4.2
4
472
3.7
7,068
4.6
6
Pennsylvania
25
2.3
74
1.5
14
541
4.3
5,913
3.9
7
Massachussetts
47
4.3
167
3.4
6
328
2.6
4,959
3.3
8
Ohio
46
4.2
175
3.5
5
475
3.8
3,994
2.6
9
Virginia
15
1.4
54
1.1
19
302
2.4
3,811
2.5
10
Connecticut
32
2.9
227
4.6
3
222
1.8
3,751
2.5
11
Georgia
19
1.7
58
1.2
17
242
1.9
3,398
2.2
12
Michigan
35
3.2
115
2.3
7
468
3.7
3,306
2.2
13
North Carolina
29
2.6
82
1.7
11
269
2.1
3,207
2.1
14
Maryland
32
2.9
95
1.9
8
236
1.9
3,125
2.1
15
Washington
*
0.0
3
0.1
44
308
2.4
2,898
1.9
16
Wisconsin
30
2.7
90
1.8
9
299
2.4
2,700
1.8
17
Tennessee
1
0.1
3
0.1
46
174
1.4
2,482
1.6
18
Minnesota
35
3.2
82
1.7
12
291
2.3
2,201
1.4
19
Arizona
6
0.5
19
0.4
28
207
1.6
2,175
1.4
20
Missouri
6
0.5
19
0.4
29
273
2.2
2,118
1.4
21
Colorado
8
0.7
18
0.4
32
220
1.7
1,908
1.3
22
Indiana
6
0.5
20
0.4
27
237
1.9
1,889
1.2
23
Nevada
*
0.0
3
0.1
45
60
0.5
1,380
0.9
24
Oregon
19
1.7
58
1.2
16
183
1.5
1,348
0.9
25
Alabama
7
0.6
18
0.4
31
128
1.0
1,289
0.8
26
Kansas
14
1.3
57
1.2
18
147
1.2
1,232
0.8
27
Kentucky
7
0.6
18
0.4
30
132
1.0
1,226
0.8
28
New Hampshire
1
0.1
5
0.1
43
64
0.5
1,213
0.8
29
South Carolina
10
0.9
29
0.6
21
121
1.0
1,163
0.8
30
Other
*
0.0
1
0.0
48
108
0.9
1,135
0.7
31
Louisiana
3
0.3
10
0.2
36
131
1.0
944
0.6
32
Iowa
10
0.9
28
0.6
22
187
1.5
941
0.6
33
Hawaii
6
0.5
17
0.3
33
60
0.5
925
0.6
34
Oklahoma
14
1.3
89
1.8
10
133
1.1
875
0.6
35
Arkansas
5
0.5
24
0.5
23
95
0.8
798
0.5
36
Rhode Island
4
0.4
13
0.3
34
48
0.4
701
0.5
37
D.C
7
0.6
32
0.6
20
29
0.2
699
0.5
38
Maine
3
0.3
9
0.2
39
57
0.5
695
0.5
39
Nebraska
5
0.5
20
0.4
26
102
0.8
631
0.4
40
Mississippi
4
0.4
9
0.2
38
68
0.5
566
0.4
41
New Mexico
2
0.2
7
0.1
41
70
0.6
523
0.3
42
Utah
1
0.1
2
0.0
47
77
0.6
498
0.3
43
Vermont
2
0.2
7
0.1
40
35
0.3
459
0.3
44
West Virginia
8
0.7
21
0.4
25
51
0.4
401
0.3
45
Idaho
3
0.3
10
0.2
35
58
0.5
397
0.3
46
Delaware
9
0.8
21
0.4
24
34
0.3
365
0.2
47
Montana
3
0.3
6
0.1
42
60
0.5
349
0.2
48
South Dakota
*
0.0
*
0.0
52
53
0.4
329
0.2
49
Wyoming
*
0.0
*
0.0
51
28
0.2
240
0.2
50
North Dakota
*
0.0
1
0.0
49
44
0.3
216
0.1
51
Alaska
*
0.0
*
0.0
50
29
0.2
161
0.1
52
Total
1,101
100.0
4,947
100.0
12,614
100.0
152,220
100.0
September 15, 1990
* Less than 500 families or returns, or less than $500,000.
Note: Families and returns are shown by state in which return filed.
170
33
2r
15
Federal Tax Increase Due to a $10,000 Cap on the Deduction for State and Local Income Taxes
and Capital Gains Realizations in 1988, Ranked by State
(Rank by Income Tax Cap}
Families with Tax Increase from S&L Tax Cap
Capital Gains Realizations in 1988
Families with Cap
Federal Tax Increase
Returns with Gains
Capital Gains
Number
Percent
Amount
Percent
Number
Percent
Amount
Percent
State
(000)
of Total
($ M)
of Total
Rank
(000)
of Total
($ M)
of Total
Rank
New York
268
24.3
1,619
32.7
1
959
7.6
14,753
9.7
2
California
225
20.4
1,155
23.3
2
1,550
12.3
24,808
16.3
1
Connecticut
32
2.9
227
4.6
3
222
1.8
3,751
2.5
11
New Jersey
45
4.1
208
4.2
4
472
3.7
7,068
4.6
6
Ohio
46
4.2
175
3.5
5
475
3.8
3,994
2.6
9
Massachussetts
47
4.3
167
3.4
6
328
2.6
4,959
3.3
8
Michigan
35
3.2
115
2.3
7
468
3.7
3,306
2.2
13
Maryland
32
2.9
95
1.9
8
236
1.9
3,125
2.1
15
Wisconsin
30
2.7
90
1.8
9
299
2.4
2,700
1.8
17
Oklahoma
14
1.3
89
1.8
10
133
1.1
875
0.6
35
North Carolina
29
2.6
82
1.7
11
269
2.1
3,207
2.1
14
Minnesota
35
3.2
82
1.7
12
291
2.3
2,201
1.4
19
Illinois
26
2.4
77
1.6
13
603
4.8
7,637
5.0
5
Pennsylvania
25
2.3
74
1.5
14
541
4.3
5,913
3.9
7
Florida
13
1.2
62
1.3
15
829
6.6
13,466
8.8
3
Oregon
19
1.7
58
1.2
16
183
1.5
1,348
0.9
25
Georgia
19
1.7
58
1.2
17
242
1.9
3,398
2.2
12
Kansas
14
1.3
57
1.2
18
147
1.2
1,232
0.8
27
Virginia
15
1.4
54
1.1
19
302
2.4
3,811
2.5
10
D.C
7
0.6
32
0.6
20
29
0.2
699
0.5
38
South Carolina
10
0.9
29
0.6
21
121
1.0
1,163
0.8
30
Iowa
10
0.9
28
0.6
22
187
1.5
941
0.6
33
Arkansas
5
0.5
24
0.5
23
95
0.8
798
0.5
36
Delaware
9
0.8
21
0.4
24
34
0.3
365
0.2
47
West Virginia
8
0.7
21
0.4
25
51
0.4
401
0.3
45
Nebraska
5
0.5
20
0.4
26
102
0.8
631
0.4
40
Indiana
6
0.5
20
0.4
27
237
1.9
1,889
1.2
23
Arizona
6
0.5
19
0.4
28
207
1.6
2,175
1.4
20
Missouri
6
0.5
19
0.4
29
273
2.2
2,118
1.4
21
Kentucky
7
0.6
18
0.4
30
132
1.0
1,226
0.8
28
Alabama
7
0.6
18
0.4
31
128
1.0
1,289
0.8
26
Colorado
8
0.7
18
0.4
32
220
1.7
1,908
1.3
22
Hawaii
6
0.5
17
0.3
33
60
0.5
925
0.6
34
Rhode Island
4
0.4
13
0.3
34
48
0.4
701
0.5
37
Idaho
3
0.3
10
0.2
35
58
0.5
397
0.3
46
Louisiana
3
0.3
10
0.2
36
131
1.0
944
0.6
32
Texas
5
0.5
10
0.2
37
717
5.7
8,954
5.9
4
Mississippi
4
0.4
9
0.2
38
68
0.5
566
0.4
41
Maine
3
0.3
9
0.2
39
57
0.5
695
0.5
39
Vermont
2
0.2
7
0.1
40
35
0.3
459
0.3
44
New Mexico
2
0.2
7
0.1
41
70
0.6
523
0.3
42
Montana
3
0.3
6
0.1
42
60
0.5
349
0.2
48
New Hampshire
1
0.1
5
0.1
43
64
0.5
1,213
0.8
29
Washington
*
0.0
3
0.1
44
308
2.4
2,898
1.9
16
Nevada
*
0.0
3
0.1
45
60
0.5
1,380
0.9
24
Tennessee
1
0.1
3
0.1
46
174
1.4
2,482
1.6
18
Utah
1
0.1
2
0.0
47
77
0.6
498
0.3
43
Other
*
0.0
1
0.0
48
108
0.9
1,135
0.7
31
North Dakota
*
0.0
1
0.0
49
44
0.3
216
0.1
51
Alaska
*
0.0
*
0.0
50
29
0.2
161
0.1
52
Wyoming
*
0.0
*
0.0
51
28
0.2
240
0.2
50
South Dakota
*
0.0
*
0.0
52
53
0.4
329
0.2
49
Total
1,101
100.0
4,947
100.0
12,614
100.0
152,220
100.0
September 15, 1990
* Less than 500 families or returns, or less than $500,000.
Note: Families and returns are shown by state in which return filed.
Table 16
Summary of State Government Individual Income Taxes, Personal Exemptions, Standard Deductions, and Deductibility of Federal Income Taxes
Tax Year 1989
As of October 1989. Only basic rates, brackets, and exemptions are shown. Local Income tax rates, even those mandated by the state, are not Included.
Taxable Income rates and brackets listed below apply to single taxpayers and married taxpayers filing "combined separate" returns In states where this is permitted.
09/17/90 16:17
Taxable Income Brackets
Personal Exemptions
Standard Deduction
Lowest:
Highest:
Married-
Married-
Federal
Tax Rates
Amount
Amount
Joint
Joint
Income Tax
State
(range In percent)
Under
Over
Single
Return
Dependents
Percent
Single
Return
Deductibleᵇ
Alabama + *
2.0-5.0%
$500
$3,000
$1,500
$ 3,000
$300
20%
$2,000
$4,000
yes
Alaska
No state income tax
Arizonac
2.0-8.0
1,290
7,740
2,229
4,458
1,337
22.29
1,115
2,229
yes
Arkansas
1.0-7.0
3,000
25,000
20
40
20
10
1,000
1,000
no
California
1.0-9.3
4,020
26,380
55d
110d
55d
n.a.
2,070
4,140
no
Colorado
5 percent of modified federal taxable income
no
Connecticut*
Limited Income tax
Delaware +
3.2-7.7
1,000
40,000
1,250
2,500
1,250
10
1,300
1,600
no
District of Columbia
6.0-9.5
10,000
20,000
1,160
2,320
1,160
n.a.
2,000
2,000
no
Florida
No state income tax
Georgia
1.0-6.0
750
7,000
1,500
3,000
1,500
n.a.
2,300
3,000
no
Hawall*
2.0-10.0
1,500
20,500
1,040
2,080
1,040
n.a.
1,500
1,900
no
Idaho
2.0-8.2
1,000
20,000
Same as federal
no
Illinois
3.0
Flat rate
1,000
2,000
1,000
n.a.
n.a.
n.a.
no
Indiana +
3.4
Flat rate
1,000
2,000
1,000
n.a.
n.a.
n.a.
no
Iowa +
0.4-9.98
1,016
45,720
20d
40d
15d
n.a.
1,230
3,030
yes
Kansas*
4.5-5.95
27,500
27,500
2,000
4,000
2,000
n.a.
3,000
5,000
yes
Kentucky +
2.0-6.0
3,000
8,000
20
40
20
n.a.
650
650
yes
Louislana
2.0-6.0
10,000
50,000
4,500
9,000
1,000
Combined with exemptions
yes
Malne
2.0-8.5
4,000
16,000
2,000
4,000
2,000
n.a.
3,100
5,200
no
Maryland+
2.0-5.0
1,000
3,000
1,100
2,200
1,100
15
2,000
4,000
no
Massachusetts*
5.0-10.0
Flat rate
2,200
4,400
1,000
n.a.
n.a.
n.a.
no
Michigan +
4.6
Flat rate
2,000
4,000
2,000
n.a.
n.a.
n.a.
no
Minnesota*
6.0-8.0
13,000
13,000
Same as federale
no
Mississippi
3.0-5.0
5,000
10,000
6,000
9,500
1,500
15
2,300
3,400
no
1
002
Table 16 (cont.)
Summary of State Government Individual Income Taxes, Personal Exemptions, Standard Deductions, and Deductibility of Federal Income Taxes
Tax Year 1989
Taxable Income Brackets
Personal Exemptions
Standard Deduction*
Tax Rates
Lowest:
Highest:
Married-
Married-
Federal
09/17/90 16:18
(range
Amount
Amount
Joint
Joint
Income Tax
State
In percent)
Under
Over
Single
Return
Dependents
Percent
Single
Return
Deductible
Missouri+
1.5-6.0
1,000
9,000
1,200
2,400
400
n.a.
Same as federal
yes
Montana°
2.0-11.0
1,500
52,500
1,200
2,400
1,200
20
2,250
4,500
yes
Nebraska
2.0-5.9
1,800
27,000
1,180
2,360
1,180
n.a.
Same as federal*
no
Nevada
No state income tax
New Hampshire*
Limited income tax
New Jersey*
2.0-3.5
20,000
50,000
1,000
2,000
1,000
n.a.
n.a.
n.a.
no
New Mexico
1.8-8.5
5,200
64,000
2,000
4,000
2,000
n.a.
3,000
5,000
no
New York +
4.0-7.5
5,500
13,000
0
0
1,000
n.a.
6,000
9,500
no
North Carolina*
6.0-7.0
12,750
12,750
2,000
4,000
2,000
n.a.
3,000
5,000
no
North Dakota*
2.6-12.0
3,000
50,000
Same as federal°
yes
Ohio +
0.743-6.9
5,000
100,000
650
1,300
650
n.a.
n.a.
n.a.
no
Oklahoma*
0.5-6.0
1,000
7,500
1,000
2,000
1,000
15
2,000
2,000
yes
Oregon*
5.0-9.0
2,000
5,000
94d
188d
94d
n.a.
1,800
3,000
yes
Pennsylvania +
2.1
Flat rate
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
no
Rhode Island
22.96 percent of federal income tax liability
no
South Carolina°
3.0-7.0
4,000
10,000
Same as federal*
no
Advisory Commission on intergovernmental Relations 39
South Dakota
No state income tax
Tennessee*
Limited income tax
Texas
No state income tax
Utah*
2.55-7.2
750
3,750
75 percent of federal exemptions
Same as federal
yes
Vermont*
25 percent of federal income tax liability
no
Virginia*
2.0-5.75
3,000
16,000
800
1,600
800
n.a.
3,000
5,000
no
Washington
No state income tax
West Virginia*
3.0-6.5
10,000
60,000
2,000
4,000
2,000
n.a.
n.a.
n.a.
no
Wisconsin*
4.9-6.93
7,500
15,000
0
0
50d
n.a.
5,200
8,900
no
Wyoming
No state income tax
Blood
11-Sop-90 1:56pm
#90-3 106
PREUMHARY
11-Sep-90
(D=#90-5 107)
- BUDGET SUMMIT -
Revenue and User Fee Package
Democrat Offer
Fiscal Years 1991-1995
[Billions of Dollars)
Provision
Effective
1991
1992
1993
1994
1995
1991-95
35% GONE
A. High Income Individuals
" MIN TAX ADJUST GONE"
1. Impose temporary deficit reduction 20% surtax on individual income over
$500,000 (1)
1/1/91
2.2
4.3
4.9
5.6
6.5
23.4
2. Remove HI wage cap.
1/1/91
4.6
11.1
11.8
12.7
13.5
53.7
3. Impose 10% luxury excise tax (2) @ ADMIN. THRESHOLDS
1/1/91
1.3
2.0
2.1
2.3
2.5
10.2
BASED
ON
CBO
BASELINE
OIL PRICES
B. Energy Security and Conservation
1. Impose 4% broad-based ad valorem energy tax (3)
1/1/91
7.8
11.6
123
13.0
13.7
58.4
300./01
2. $20 price floor for imported crude oil; exemption for Canada, Mexico,
RAISES NO NET-
and Venezuela; revenue devoted to low-incorne energy assistance
1/1/91
--
--
:
;
---
3. Double gas guzzler tax
1/1/91
0.1
0.1
0.1
0.1
0.1
0.5
4. Extend section 29 credit and expand to tight sands gas
1/1/91
(5)
-0.1
-0.2
-0.2
-0.3
-0.9
5. Adopt Incentives for domestic energy production
1/1/91
-0.3
-0.4
-0.6
-0.6
-0.7
-2.6
C. Health and Environment
1. Double beer and wine taxes; Index beginning in 1992 (exclude
sparkling wine)
10/1/90
1.5
1.4
1.6
1.8
2.0
8.3
2. Increase distilled spirits tax by $2.00 to $14.50 per proof gallon
10/1/90
0.4
0.4
0.4
0.4
0.4
2.0
3. Add new ozone-depleting chemicals covered by Montreal Protocol
1/1/91
0.1
0.1
0.1
0.1
0.1
0.5
D. Miscellaneous Revenue Items
1. Extend FUTA surtax
1/1/91
0.7
1.1
1.1
1.1
1.2
5.2
2. Amortize Insurance policy deferred acquisition expenses (DAC)
1/1/91
1.3
1.4
1.6
1.6
1.6
7.5
3. Loss deductions and salvage values for Insurance companies
1/1/90
0.5
0.3
0.3
0.2
0.1
1.3
4. Adopt foreign compliance provisions
3/20/90
(4)
0.1
0.1
0.1
0.1
0.3
5. Account for salvage and subrogation in property and casualty insurance
company loss deductions (8)
1/1/91
0.6
0.4
0.4
0.9
0.3
2.0
6. Increase the tax on asset reversions from delined benefit plans to 30%
9/10/90
(4)
(5)
(5)
(5)
(5)
-0.1
7. Payroll tax deposit stabilization
-
1.0
2.2
-3.2
-
t
---
Page 2
Provision
Effective
1991
1992
1993
1994
1995
1991-95
E. User Fees
1. Increase Airport Trust Fund aviation excise taxes (5 years) (7)
(8)
1/1/91
1.3
2.3
2.5
2.7
3.0
11.8
2. Increase harbor maintenance excise tax (7)
(9)
1/1/91
0.3
0.3
0.4
0.4
0.4
1.8
3. Extend IRS user fees (5 years) (7)
(9)
10/1/90
(4)
(1)
(1)
(d)
(4)
(4)
4. Extend leaking underground storage tank (LUST) trust fund (5 years)
10/1/90
0.1
0.1
0.1
0.1
0.1
0.6
5. Extend highway fuels excise tax and Increase motor fuels tax by
7 cents per gallon (10)
1/1/91
5.4
6.9
6.9
7.0
7.0
33.2
F. Growth and Equity Incentives
1. Extend certain expiring provisions (permanent)
-2.3
-2.8
--
-0.6
-1.1
-1.7
-8.5
2. Adopt IRA proposal
1/1/92
-
-1.6
-4.6
-5.6
-6.6
-18.5
--
-1.2
-1.4
-1.7
-2.1
-2.5
-8.6
3. Other items
--
-1.8
-10.1
-11.1
-13.8
-14.6
-51.5
G. Regressivity Offset (11)
25.2
31.3
23.5
24.9
25.1
130.0
GRAND TOTALS
11-Sep-90
Joint Committee on Taxation
NOTES: Estimates provided are consistent with the Congressional Budget Office (CBO) updated budget baseline. Additional items contained In the President's
budget proposal, relating to employment taxes and user fees, are estimated by CBO.
(1) Surtax to stay In effect until the budget is balanced.
(2) I ax applies to specific newly-manufactured Items with retail prices above the following thresholds: automobiles--$30,000; private boats and yachts-$30,000;
private aircraft-no threshold; electronics-$1,000; jewelry-$5,000; and furs-$500. Tax is 10% of purchase price in excess of thresholds.
(3) Estimate assumes tax based on retail price for electricity; adjustments are made for actual energy imports and exports but no further adjustments are assumed.
(Details of this tax are subject to further development.) At least 50% of motor fuels tax component of broad-based energy tax dedicated to deficit reduction;
remainder dedicated to Highway Trust Fund (20% of this portion to be allocated to mass transit).
(1) Gain of less than $50 million.
(5) Loss of less than $50 million.
(6) The estimate of the effect of this proposal does not account for possible interaction with the proposal to increase the tax on asset reversions.
(7) Estimate is net of Income tax offset
(8) This estimate is presented relative to the CBO baseline which assumes extension of the Airport and Airway Trust Fund (AATT) taxes with the trigger in effect.
The estimate reflects the effects both of removing the trigger and of increasing the rates of certain of the AATF taxes as proposed in the President's budget.
(9) Estimate provided by CBO.
(10) Extension assumed in budget baseline. 50% of motor fuols tax increase dedicated to Highway Trust Fund; 50% dedicated to delicit reduction. Each State to
receive Highway Trust Fund expenditures equal to at least 95% of its contribution.
(11) Estimale assumes Increase in EITC to 30% (22.5% phaseout) in 1991 and 1992 and 33% (23.5% phaseout) in 1993 and thereafter; and increase in standard
deduction by $150 single, $200 head of housnhold, and $250 joint in 1991 and by $200 single, $250 head of household, and $300 joint in 1992 and thereafter.
(Policy decision, Including percentages and dollar amounts, not yet made.)
11-Sep-90 12:37pm
#90-5 107
PRELIMINARY
11-Sep-90
(R=#90-3 106)
- BUDGET SUMMIT: Revenue and User Fee Package -
Distribution of the Federal Tax Burden and the Percentage Change in Tax Liability
by Income Class, 1990
Increase or
Percentage
Distribution of the
Distribution of the
Decrease In
Change in
Federal Tax Burden
Federal Tax Burden
Income Class (1)
Tax Liability (2)(3)
Tax Liability (2)(3)
Under Present Law (4)
Under Proposal (2)(3)(4)
Billions of Dollars
Percent
Percent
Percent
Less than $10,000
-$0.5
-3.3%
1.6%
1.6%
10,000 to 20,000
-3.5
-5.4%
7.6%
7.0%
20,000 to 30,000
2.5
2.5%
11.9%
11.9%
30,000 to 40,000
3.4
2.9%
13.4%
13.5%
40,000 to 50,000
2.8
3.2%
10.2%
10.2%
50,000 to 75,000
3.4
2.0%
20.0%
19.9%
75,000 to 100,000
1.9
2.9%
7.7%
7.7%
100,000 to 200,000
3.8
3.7%
12.1%
12.2%
200,000 and over
8.9
6.7%
15.4%
16.0%
Total, All Taxpayers
$22.8
2.6%
100.0%
100.0%
Source: Joint Committee on Taxation
(1) The income concept used to place tax returns into income classes is adjusted gross income plus [1] tax-exempt interest, [2] employer contributions for
health plans and life insurance, [3] Inside buildup on life insurance, [4] workers' compensation, [5] nontaxable social security benefits, [6] deductible
contributions to individual retirement accounts, [7] the minimum tax preferences, and [8] net losses in excess of minimum tax preferences from passive
business activities.
(2) Distributional analysis includes effects from surtax on high income, removal of HI wage cap, beer and wine taxes and indexing, distilled spirits tax
increase, energy tax, motor fuels tax, and regressivity ollset; analysis does not take into account changes in taxpayer behavior.
(3) Estimates of total tax liability presented in distributions will not match estimated changes in receipts because of differing time periods (CY 1990 vs.
FY 1991-95) and because of varying patterns of fiscal year receipts.
(4) Distributions represent combined effects of individual income taxes, payroll taxes, Federal excise taxes, and estate and gift taxes. For the purpose of
distributions, the full burden of payroll taxes is assigned to employees. Excise taxes are assumed to be borne fully by individuals either directly through
purchase of the taxed commodity or indirectly through higher prices on all commodities as businesses pass along these added costs. Because of the
uncertainty concerning the incidence of the corporate income tax, it is excluded from this table. Information in table excludes individuals who are
dependents of other taxpayers.
Summit Revenues - 35
Distilled Spirits/Beer/Wine
1. Current law equivalency for beer and wine with 25% of
equivalency rate for small wineries (first 100,000
gallons for wineries with total production under 200,000
gallons) and small breweries (first 10,000 barrels for
breweries with total production under 20,000 , barrels)
(10/1/90) - 4.4/23.4
a. Beer - 56 cents per six pack; 14 cents per six pack
for small breweries
b. Wine - 62 cents per bottle; 15.5 cents for small
wineries
2. Establish rate based on indexing since 1951(10/1/90) -
4.9/25.4
a. Beer - 82 cents per six pack
b. Wine - 10 cents per bottle
3. Triple (approx.) beer and wine and increase d/s by $1.00
and index - 2.3/16.0
a. Beer - 48 cents per six pack
b. Wine - 9 cents per bottle
4. Increase d/s by $1.00, (1/1/91) - (2.1/14.0)
a. Beer - 42 cents per six pack - 260% increase
b. Wine - 16 cents per bottle - 520% increase
5a. $18 billion revenue target/Increase DSP by $1.00 per
barrel and increase beer and wine to maintain existing
product balance in revenues (without indexing) -
2.8/18.7
a. Beer - 58 cents per six pack
b. Wine - 11 cents per bottle
5b. Same as 5a with exemption from increase for small
wineries (first 100,000 gallons for wineries with total
production under 200,000 gallons) and small breweries
(first 30,000 barrels for breweries with total
production under 60,000 barrels) - 2.7/18.3
5c. Same as 5a (with indexing) - 2.4/18.7
a. Beer - 51 cents per six pack
b. Wine - 10 cents per bottle
5d. Same as 5c with small producer exemption described in 5b
- 2.3/18.1
6. Repeal Alcohol Occupational Tax for Retailers - .1/.5
TOBACCO INCREASES
effective 1/1/91
1991
1992
1993
1994
1995 1991-95
2-cent increase in all tobacco t takes
0.3
0.4
0.4
0.4
0.4
1.9
with indexing
0.4
06
0.7
0.9
1.0
3.6
8-cent increase in all tobacco t takes
1.1
1.6
1.5
1.5
1.5
7.2
with indexing
1.1
1.8
1.9
2.0
2.1
8.9
16-cent increase in all tobacco taxes
1.5
3
3
2.9
2.9
13.3
with indexing
2.3
3.5
3.7
3.9
4.2
17.6
20-cent increase in all tobacco taxes
2.6
3.8
3.8
3.7
3.6
17.5
with indexing
2.4
4.0
4.2
4.2
4.2
19.0
ADDITIONAL REVENUES
CBO/JCT
CBO/JCT
Scoring
OMB Scoring
Less OMB
TAX MEASURES
1991 1991-95
1991 1991-95
1991 1991-95
1. Luxury Excise Taxes Effective 10/1/90
Tax 10% of the purchase
price in excess of threshholds:
0.9 7.8
Automobiles - $30,000
Boats and yachts - $30,000
Electronics - $1,000
Jewelry - $5,000
Furs - $500
2. Ozone Depleting Chemical Excise Tax
0.1 0.5
0.1 0.5
The proposal would include the
following chemicals in the ozone
depleting chemical excise tax base
on January 1, 1991: carbon
tetrachloride, methyl chloroform,
CFC-13, CFC-111, CFC-112, CFC-211,
CFC-212, CFC-213, CFC-214, CFC-215,
CFC-216, and CFC-217. Methyl
chloroform is the only chemical that
will raise a significant amount of
revenue, since carbon tetrachloride is
principally used as a feedstock and only
small amounts of the CFCs are produced.
3. Indexing of Excise Taxes
Index all Excise Taxes (other than
alcohol, tobacco and ad valorem)
0.3
8.0
4. Petroleum Fuels Tax
0.8
7.8
1.2
8.4
1 cent per gallon tax on refined
petroleum products, excluding
feedstocks (estimates very
preliminary)
TOTAL
24.1 (E)
2.5 24.7
Regular Annual, Supplemental, and Deficiency Appropriation Bills
Comparison of Administration Budget Requests and Appropriations Enacted
Administration
Difference
Budget
Appropriations
(under ->
Calendar Year
Requests
Enacted
(over +)
1945
$52,453,310,868
$61,042,345,331
- $1,410,965,537
1946
30,051,109,870
28,459,502,172
-
1,591,607,698
1947
33.367.507,923
30,130,762,141
-
3,236,745,782
1948
35,409,550,523
32,699,846,731
-
2,709,703,792
1949
39,545,529,108
37,825,026,214
-
1,720,502,894
1950
54,316,658,423
52,427,926,629
-
1,888,731,794
1951
96,340,781,110
91,059,713,307
-
5,281,067,803
1952
83,964,877,176
75,355,434,201
-
6,609,442,975
1953
56,568,694,353
$4,539,342,491
- 12,029,351,862
1954
50,257,490,985
47,642,131,205
-
2,615,359,780
1955
55,044,333,729
$3,124,821,215
-
1,919,512,514
1956
60,892,420,237
60,647,917,590
-
244,502,647
1957
64,638,110,610
59,589,731,631
-
5,048,378,979
1958
73,272,859,573
72,653,476,248
-
$19,383,325
1959
74,859,472,045
72.977,957,952
-
1,881,514,093
1960
73,845,974,490
73,634,335,992
-
211,638,498
1961
$1,597,448,053
85,605,487,273
-
4,990,960,780
1962
95,803,292.115
92,260,154,659
-
4,543,137,456
1963
98,904,155,136
92,432,923,132
-
5,471,232,004
1964
98,297,358,556
94,162,918,996
-
4,134,439,560
1963
109,448,074,896
107,037,566,896
-
2,410,508,000
1966
131,164,926,586
130,281,568,460
-
883,358,106
1967
147,804,557,929
141,872,346,664
-
5,932,211,265
1968
147,908,$12,996
133,339,868,734
-
14,568,744,262
1969
142.701.346.215
134,431,463,135
-
8.269,883,080
1970
147,765,358,434
144,273,528,504
-
3,491,829,930
1971
157,874,624,937
165,225,661,863
-
2,648,963,072
1972
185,431,804,552
178,960,106,864
-
6,471,697,688
1973
177.959.504,255
174,901,434,304
-
3,058,069,951
1974
213,567,190,007
204,012,311,514
-
9,654,878,493
1975
267,224,774,434
259,852,322,212
-
7,372,452,222
1976
282,142,432,093
282,536,694,665
+
394,262,572
1977
364,967,240,174
354,025,780.783
-
10,841,459,391
1978
348,506,124,701
337,859,466.730
- 10,646,657,971
1979
388,311,576,432
379,244,865,439
-
9,066,810,993
1980
446,690,302,845
441,290,587,343
-
5,399,715,502
1981
541,827,827,909
544,457,423,541
*
2,629,595,632
1982
507,740,133,484
$14,832,375,371
+
7,092,241,887
1983
542,956,052,209
551,620,505,328
+
8,664,453,119
1984
576,343,258,990
559,151,835,986
- 17,191,422,994
1985
588,698,503,939
583,446,885,087
-
5,251,610,852
1986
590,345,199,494
577,279,102,494
- 13,056,097,000
1987
618,268,048,956
514,526,518,150
-
3,741,530,806
1988
621.250.663,758
625,967,372,769
+
4,718,709,013
1989
652,138,432,359
666,211,680,769
+ 14,073,248,410
Totals
10,249,467,607,455
10,075,912,028,737
- 173,355,578,719
01/19/90
Prepared by House Committee on Appropriations
ADMINISTRATION'S OFFER OF 9/7
(with CY1995 capital gains)
Annual Change in Tax Liability
8
Change in Liability ($ billions)
6
4
2
0
below 0
0-10
10-20
20-30
30-50
50-75
75-100
100-200
over 200
Income Class (FEI, $ thousands)
Rev. 9/10
09/12/90
21:04
7868440
4
002
Alcohol Option
Increase excise tax on distilled spirits by $1.00 to $13.50/proof
gallon. Increase excise taxes on beer and wine on an alcohol
equivalency basis to hit a 5 year. revenue target of $18 billion.
(Proposal shown below equalizes at 80% of equalizing rate i.e, tax
on beer would increase to $26.78/bbl from $9.00/bbl and tax on
table wine would increase to $3.02/gallon from $0.17/gallon)
Current tax
Proposed tax
Six pack of beer
$ .16
$ .49
Bottle of table wine
.03
.61
Bottle of liquor
2.00
2.16
Fiscal Years
1991
1992
1993
1994
1995
1991-1995
($'s in billions)
Receipts effect
Distilled
0.1
0.2
0.2
0.2
0.2
0.9
Beer
1.8
2.5
2.6
2.6
2.6
12.0
Wine
0.9
1.3
1.3
1.3
1.3
6.0
Totals
2.8
4.0
4.1
4.1
4.1
18.9
09/14/90
10:27
OMB PRESS OFFICE
018
A14
THE WALL STREET JOURNAL
FRIDAY, SEPTEMBER 14, 1890
High Capital-Gains Tax Busts
State Budgets
By ALAN REYNOLDS
couraged efficient turnover of assets
are widely considered to be "liberal" Dem-
Many state governments. particularly
among higher-income taxpayers that the
ocrats who are supposed to favor high fed.
In coastal states with a large proportion of
average tax paid remained exactly what It
eral tax rates on capital gains out of adeo.
affluent taxpayers. have faced unexpected
had been in the high-tax 1970s: 15%.
logical habit. Yet the evidence B now clear
weakness III their tax receipts In the past
In 1388. by contrast. the capital gains
that this federal Lax clearly damages their
three or four years. This has led many
tax on the highest-income taxpayers ruse
own state treasuries. even avide from its
states to introduce higher Income and
to 267 percent, but the average tax rate
damaging effects on the economic growth
salestax rates, which damaged their own
rose to 24%. It is doubtful if there has ever
and on the value of real estate and other
economics and placed 8 significant drag on
assets. State guver-
the national economy as well.
Forfeited Gains
nors properly com-
The states' choice is part of a down-
Capital gains by state before and siter the
in
plain about the
ward spiral. States self inflicted damage
$50
many other ways in
reduces federal tax receipts, Weak federal
45
which the federal
receipts then increase the threat of higher
1995
government
at
federal rates. hurting the economy and in
40
tempts LD preempt
turn weakening state receipts. States then
25
1857
the states'
tax
raise taxes. and the cycle continues.
30
bases-by limiting
One particular federal tax has had an
25
the deductibility of
especially harsh impact on state tax re-
20
state income takes
ceipts. the 33% maximum marginal tax
15
or imposing higher
rate on capital gains enacted in 1986. Rais-
federal excise taxes.
ing the maximum marginal rate on capi-
10
Since taxpayers do
tal gains to 33'r from 20% stopped the nat
5
not have inflaitely
ural growth of taxable state income from
0
deep pockets. the
this source. States in which capital gains
New
York
Calliernia
Florida
Teras
Blinets
more the federal
had previously been an important source
Stump: Suman Montality, JOST Committee on Tuesdon: 1958
RS Shipting of Ascome
government takes.
of taxable state income are finding weak
the less IS Jeft for
tax receipts, perhaps without understand-
been a time in U.S. history when so many
the states. Yet in the case of capital gains,
ing the reason
taxpayers faced tax rates above 20% on
governors of the states most seriously In-
The chart shows realized capital gains
the uncertain rewards from life savings.
jured appear willing to impose dracentan
(net after losses) for the five states that
States In which capital gains were a
state tax rates on their citizens rather than
account for nearly half the capital gains in
particularly important source of taxable
lobby for relief from this counterprodac-
the entire nation. Florida and Texas have
income expected this source of income to
live federal tax.
no income tits. which is one reason that
grow between 1985 and 1968. After all. the
many people who have accumulated sub-
Dow Junes average al the end of 1988 was
Mr. Reynolds is n research fellow at the
stantial assets live there. New York, Cali-
627 higher than it had been in 1985. But
Hudson Institute in Indianapolis.
forma and Illinois have long depended
the states were mugged by the federal tax
heavily on capital gains taxes. So have
law of 1986. By imposing a 28-33% tax-
New Jersey, Massachusetts, Pennsylvania
even on the inflated capital gains of cou-
and Connecticut.
ples with rather modest incomes-the fed-
Until recently. evidence that a high fed-
eral government made It extremely expen-
eral capital gains rate has hurt state col-
sive for nearly all taxpayers to realize any
lections might have been deemed ambigu-
capital gains. particularly in states that
ous. People rushed to realize gains in 1986
added then own tax on top of the fed.
because the tax rate was about to rise to
eral levy, where the combined capital
28. the following year. It might be argued
gains burden could reach 39%. Taxpayers
too that in 1967 capital gains were weak be.
responded by avoiding the sale of assets
cause of the October stock market crash,
(except under Chancial distress). and by
though there were plenty of gains in the
making sure that their future investments
year's first eight months.
were not subject to combined capital-gains
In any case, the ambiguity ended when
taxes-they invested In money-market
the Internal Revenue Service released 115
funds instead of growth stocks. Tax re.
1966 estimates this spring, For all five
ceipts collapsed in states most dependent
states ITT the chart, the amount of capital
011 capital gains-Including much of the
gains reported was less than hall of what it
northeast.
had been in 1986. the last year of 20% tax
But this is not the only adverse effect of
rates, and well below the level of 1985
high federal capital-gains taxes on state
rabout 3', lower. on average 1. This decline
revenues. The Increased federal tax rate
in taxable state income from capital gains
on capital gains also provides a greater In.
over three years occurred despite the na
centive to locate small businesses in states
tionwide increase of more than 22% in per.
with little or no Income tax, because of the
sonal income in that same period.
brutal combination of federal and state
For ilso federal government. the weak-
capital-gains tax on those who sell their
DOSS in realizations since 1986 has been al
businesses. Loss of deductibility for state
least partly offset by a much higher aver-
income taxes would greatly aggravate this
age tax rate on a small volume of capi-
effect for small businesses remaining in
tal gains. The maximum federal capital
states like New Jersey, New York and Cal-
gains Tax was increased to 15% in 1975
Mornia. For taxpayers in a 33% federal
from 279 in 1968. Yes So few of the af
bracket and an 87 state bracker. for ex-
feeted high bracket taxpayers actually re-
ample. the combined marginal tax on capi-
aboved gains at the punitive rates of 1975
tal gains would rise to 41% from the cur-
that the Average capital-gains tax on both
rent 38% Even fewer capital gains would
excluded and taxable gains remained ex-
then be cashed in states with high in.
actly 1/15 same in 1975 as it had been in
come-tax rates.
1965. 15% The 190., reduction of the high
Governors of several states most in-
est capital Raths tax to 20% percent SO en-
jured by the federal tax on capital gains
09/14/90
12:28
OMB/ESD FAX# 3954817 OR 3953165
002
Electricity Data
Total Generation & Sale
Total Net Generation
2,781 billion KWH
Total Sales
2,634 billion KWH
X 1$ = 26.34 BILLION
X.1 $ = 2.634 BILLION
(difference is due to transmission losses)
Sales by End-Use Sector (billions KWH)
Residential
904
34%
Commercial
724
28%
Industrial
915
35%
Other
91
3%
Total
2634
99%
Industrial
= all sales to business that require more than 1,000
KWH of service
Manufacturing Use
Industrial sector includes manufacturing, construction,
mining and agriculture. (Services are largely in the
commercial sector)
Based on a 1986 survey, manufacturing represents
approximately 77% of the industrial sector use.
If this remains constant, 1989 electricity use by
manufacturers would be about 705 billion KWH, or 27% of
total electricity sales.
2.6 X 3/4 =1.75B/YR
Note:
In the aggregate, electricity demand tends to track GNP
growth on a one-to-one basis, although growth rates
within sectors could vary.
Source:
EIA 1989 data
FACE THE NATION WITH LESLEY STAHL - September 23, 1990
2
MS. STAHL: Should the automatic spending cuts be delayed? We'll ask Senate leaders George
Mitchell and Bob Dole--and we'll talk with economist Lester Thurow. Inflation and recession: the one-
two punch--an issue facing the nation.
ANNOUNCER: From CBS News, Washington, "Face the Nation with Lesley Stahl." This
portion of "Face the Nation with Lesley Stahl" is sponsored by McDonnell-Douglas and by the Archer
Daniels Midland Company--ADM, supermarket to the world.
(Announcements)
MS. STAHL: With us now from Detroit, Senate Majority Leader George Mitchell; and here in
Washington, Senate Minority Leader Bob Dole.
Senator Dole, are you ready to break with the White House, get some kind of an agreement
with the Democrats, get rid of capital gains and get your budget deal--get it off the table completely?
SENATOR DOLE: I'm ready to get this agreement. I think the American people are tired of
us sitting around and sitting around and doing nothing. It's almost like a filibuster going on in some
of these sessions.
To break with the president? No. I think, as I've suggested, we have two packages--one with
all the goodies, one with just plain deficit reductions; have two votes. And that's how I would deal with
that. That's just one idea.
MS. STAHL: When you call the capital gains "a goodie," I mean you must be against it if
you're willing to call it "a goodie."
SENATOR DOLE: No, I'm for a lot of the goodies. No, there are lot of goodies--low-income
housing, capital gains, child care, earned jobs credit.
MS. STAHL: Yes, but that's a goodie for the rich, isn't it?
SENATOR DOLE: Well, you know, my view is we need to get this done--we ought to stop
dancing around capital gains, face up to it, get it resolved and get this package put to bed.
MS. STAHL: You know--well, let me ask Senator Mitchell. Are you willing, Senator Mitchell,
to allow capital gains to be the major sticking point? Why don't you Democrats give in so we can get
a deal?
SENATOR MITCHELL: Well, we've given in a great deal already on the spending cuts. We've
said we would accept it, provided there were an offsetting increase in the top rate on the wealthy.
What we cannot give in, what we simply cannot accept, is a package which says that we will reduce
the tax burden on those making more than $200,000 a year and increase the tax burden on everyone
else. That's just not fair, and it ought not to be accepted.
MS. STAHL: Okay, let me ask both of you. Why not just get capital gains off the table right
now--just put it off the table? Would you two agree to that between yourselves, Senator Dole?
NEWS TRANSCRIPTS, INC. (202) 682-9050
FACE THE NATION WITH LESLEY STAHL - September 23, 1990
3
SENATOR DOLE: Well, I don't think that's going to happen. I think it's pretty much of a
given it's going to be on the table. But I think we're losing sight of what we got together for, and
that's deficit reduction.
Now, with all the focus on capital gains, we'd better get back to deficit reduction, or we're going
to have some real problems.
SENATOR MITCHELL: Well, I just say, Lesley, I agree completely with Senator Dole on that.
Remember, now, the purpose here is to reduce the deficit. We have agreed in these talks for purposes
of the discussion that the capital gains proposal will increase the deficit by $21 billion. Does it make
sense for the president to say that in a deficit-reduction effort, the most important thing to him is
something that will increase the deficit by $21 billion? That's the problem with it. Take it off the
table, and rates off the table--that's fine with us.
MS. STAHL: What's wrong with what the senator just said, Senator Dole? You're having
trouble because I think you agree with Senator Mitchell and don't agree with the White House.
SENATOR DOLE: No, but we've got to get the package passed. That's the bottom line.
I think there are a lot of Republican votes who will vote for the package if it includes capital
gains, particularly House Republicans. And this just isn't--if Senator Mitchell and I could do this in
thirty minutes, we'd probably get it passed in the Senate.
MS. STAHL: Without capital gains?
SENATOR DOLE: Well, with or without. But in any event, we want deficit reduction.
MS. STAHL: Well, which? With or without?
SENATOR DOLE: Well, I'd want it with; and he probably would be without. But we've got
to get the package passed; we've got to have enough votes. That's why the White House is so
concerned about the capital gains issue, in my view, in addition to the promise that President Bush
made in the campaign.
MS. STAHL: Why is he so interested in it?
SENATOR DOLE: He wants to get enough Republican votes in the House to get the package
passed.
MS. STAHL: I see. Senator Mitchell, if you have capital gains in a goodies package, a separate
package, do you think that this will help the situation-or is it just where it is right now? You said the
other day everything's basically done except the capital gains.
SENATOR MITCHELL: Well, I don't want to create a misleading impression. There are
differences in other areas--we haven't reached agreement--but I believe that the other differences can
be resolved quickly if we could resolve what I believe to be the issue of tax fairness.
NEWS TRANSCRIPTS, INC. - (202) 682-9050
FACE THE NATION WITH LESLEY STAHL - September 23, 1990
4
With respect to the separate package, I commend Senator Dole. He's trying to break the
logjam, come up with some proposal. Unfortunately, the administration expressed its adamant
opposition to it at the outset. We'd be prepared to consider it, to work to see precisely what he has in
mind, and to come up with some way to get this thing done.
I agree with Senator Dole. If this were a negotiation just among the members of Congress--that
is, the congressional leadership--we would have had an agreement a couple of weeks ago. The problem
is the administration's position and its dominant role in the discussions and its insistence upon its way.
MS. STAHL: And the House Republicans?
SENATOR MITCHELL: I don't think all of them, but many of them--that's correct. I think
Senator Dole's analysis in that regard is correct.
But we've been prepared to compromise. We have compromised. We're acting in good faith,
but we simply can't accept the proposal that says you're going to cut the tax burden for those making
over $200,000 and reduce (sic) it for everyone else. That's just not fair.
In fact, he talks about getting the votes of House Republicans. We couldn't get Democrats in
the House or Senate to vote for such a package--and we shouldn't even try.
MS. STAHL: Senator Dole?
SENATOR DOLE: I think he's correct; and we're looking at ways to achieve what he suggests,
the majority leader suggests. And as to how we can increase taxes on upper income in a way that will
in effect maybe pierce this so-called bubble but maybe not go clear to 33 percent.
MS. STAHL: Okay. You're meeting again today at 6 o'clock. Do you have a new plan, Senator
Dole, to put on the table which would increase taxes on the wealthy?
SENATOR DOLE: No. Senator Mitchell, I think, has been working, you know, on an idea that
he has prepared, I think--I don't want to get him in a spot--to lay down on--
MS. STAHL: Well, let's get him in a spot.
SENATOR DOLE: --lay down on Friday. But I think Mr. Darman, the OMB director, suggested
we don't do that. My view is somebody needs to put something on the table. We need to resolve this;
we need to finish it. We're going--we're losing votes every day, in my view, in the House and the
Senate by not getting it done.
MS. STAHL: All right. What's the plan? Let's put it on the table, Senator Mitchell.
SENATOR MITCHELL: Well, what we have proposed to do is that we meet with the
Democratic negotiating group, including the chairman of the Tax Writing Committee, Senator Bentsen
and Congressman Rostenkowski, who really will be central participants in this--who are central
participants; and that we develop a proposal to come forward to try to break the deadlock.
Unfortunately, the White House said no, no, no, don't do that--we don't want you to do that yet.
NEWS TRANSCRIPTS, INC. (202) 682-9050
FACE THE NATION WITH LESLEY STAHL - September 23, 1990
5
I just share the impatience which Senator Dole has expressed and which the American people
have expressed. And that is we've got to get this done, and we want to bring it to a conclusion.
MS. STAHL: What would you propose, if you were to propose?
SENATOR MITCHELL: Well, I don't think we should be doing the negotiations over the air.
And also I want to emphasize, any proposal has to have the approval of our negotiating group and
specifically Senator Bentsen and Congressman Rostenkowski.
Now, what we proposed was to get our group together, see if we couldn't come up with
something--and we'll obviously ultimately have to do that. We've got to break this impasse; we've got
to get an agreement and get it passed.
MS. STAHL: October 1st is the deadline for this devastating sequester. Do either of you really
think that any government official would deliberately instigate those cuts that would shut the
government down? Law enforcement would be hurt; air traffic controllers would be fired,
Do you really think that it's a bluff on the president's part, or will he conceivably go through
with this?
SENATOR DOLE: Well, my own view is, after a week or two of sequester, the White House
and the Congress would be looking for some way out. You know, that may sound like a great idea up
front. But we're talking about a deep, deep sequester--not just a 5 or 10 percent--32.5 percent. And
that's not going to wash, in my view.
SENATOR MITCHELL: The best way to prevent a sequester is to get a meaningful budget
agreement that's fair and responsible, and get it passed before the sequester takes place.
MS. STAHL: How much politics is involved here? For instance--and this is only one little
chunk of the politics--you know, the president not wanting to back down just for his own image? Or,
as has been charged, Senator Mitchell, the Democrats wanting to wait until after the election because
in this situation you're not going to be pounded for being big taxers because nothing is resolved yet?
How much is politics a factor, Senator Dole?
SENATOR DOLE: Well, I think early on, there was some politics. I think at this stage, it's
sort of non-partisan, bipartisan. I mean, let's face it, President Bush took a big risk when he broke
his pledge on taxes; and he walked that extra mile. And I think now we're trying to all get together.
So politics, in my view--if we get a good package, it will help both parties. If we don't get a package,
it's going to hurt both parties--and it's going to hurt the president, too.
MS. STAHL: Senator Mitchell, what about the problem of it hurting all incumbents-not party,
but anybody in power gets hurt by this?
SENATOR MITCHELL: We have committed ourselves to getting an agreement and to having
it approved with a majority of support in both parties in both Houses. And I commit myself 100
percent that effort, if we can reach a fair and responsible agreement. And we're just there; we're right
on the edge. That's what's so frustrating about this. We've gone a long way, and, but for this one
NEWS TRANSCRIPTS, INC. (202) 682-9050
FACE THE NATION WITH LESLEY STAHL - September 23, 1990
6
issue, we're prepared for an agreement.
And we'll pass it. We'll work hard. It's going to be difficult. But I believe we can pass it.
MS. STAHL: Is it this one issue, Senator Dole? Is it capital gains? Is that it?
SENATOR DOLE: Well, that's the hurdle right now. I mean, it seems to me that once we
jump that hurdle--hopefully that's going to be tonight or tomorrow some time, then we can--you know,
there are still other differences, whether it's on entitlements or the make-up of taxes or how much you
cut agriculture, things of that kind.
But, yes, right now, the big hurdle is capital gains. And we've got to deal with it carefully, as
I've been told by the White House experts--and they are experts. They tell me that, you know, that
they've got to bring everybody along in this game, and we shouldn't be in too much of a rush. Well,
I don't know what else they've got to do this year, but I've got a long of things I'd like to do.
MS. STAHL: Let me ask you both very quickly about the wisdom of cutting the deficit and
raising taxes as we are obviously heading into a recession. Is there any thinking going on that maybe
all of this is unhealthy for the economy--the whole thing, Senator Mitchell?
SENATOR MITCHELL: Well, the most effective thing we could do for the American economy
is to reduce interest rates. I believe that, in the long run, the American economy needs meaningful
deficit reduction as a way to bring about a gradual long-term reduction in interest rates. It may have
an adverse short-term effect; but I believe that, on balance, what we're trying to do is the right thing,
and we must go forward with it.
The future of our economy requires meaningful action and lower interest rates. If we do that,
I think we'll see economic expansion of the type we all want.
MS. STAHL: Do you think raising taxes-the ones that have been talked about--is the way to
go in a recession?
SENATOR DOLE: Right, but we've got to be careful. I think both parties agree not to raise
taxes any more than is necessary to have to do. We don't want to get up to $210 or $220 billion in tax
increases. Short term, it's not probably going to be a big plus. But long term, it will be a plus, if it's
good--you know, no smoke, no mirrors--good debt-reduction cuts and entitlements and other things.
Then it's going to be good for the economy.
MS. STAHL: Let me ask you, Senator Dole, one final question. Do you really think in your
own mind, you as an individual and you as the minority leader, that capital gains tax breaks are a
good thing for the economy now?
SENATOR DOLE: Well, you know, yes, I think it's a good thing for the economy. I don't
disagree with Senator Mitchell's--if we're going to give those over $200,000 a break, they ought to pay
for it. But I think it will stimulate jobs, and that's what Newt Gingrich and others on the House
Republican side are so concerned about. And I agree with Newt--create jobs.
I hope it doesn't--a big, big sell-off and people take their money and invest it somewhere
overseas. That would not be a good result.
NEWS TRANSCRIPTS, INC. (202) 682-9050
FACE THE NATION WITH LESLEY STAHL - September 23, 1990
7
MS. STAHL: But isn't that very possible?
SENATOR DOLE: Well, that's what one very respected person who's written today in The
Washington Post, Jodie Allen.
MS. STAHL: Well, isn't that a--doesn't that weigh in here?
SENATOR DOLE: That's a considered--
MS. STAHL: People can take--they know a capital gains tax break is out there. They sell off
their assets. They take the money they've gained from it, and go and invest in West Germany or
Japan or somewhere else.
SENATOR DOLE: Well, that's a possibility. I guess 16- percent increase in just the past few
months--maybe Senator Mitchell will have a comment on that.
MS. STAHL: Well, does that come into your deliberations?
SENATOR DOLE: Yes, I think so. I think we try to consider everything. But let's keep in
mind this is also a political issue, very important to the president. It's a promise he's made. He
doesn't ask for much from the Congress, and he'd like to have this, and I think we can work it out.
MS. STAHL: Okay. Let me thank both of you, Senator Dole, Senator Mitchell, thank you.
We'll talk more about the economy when we come back.
WOMAN IN THE STREET: Everything is much more expensive.
MAN IN THE STREET: The cost of living is just sky-rocketing.
WOMAN IN THE STREET: Everything is going up, up, up, very, very fast.
(Announcements)
MS. STAHL: Joining us now, economist Lester Thurow, dean of the Alfred P. Sloane School
of Management at MIT. Professor Thurow, let's first talk about the recession. I won't ask you if we're
in one, because that's such a technical phrase. But how deep, how longlasting, is the problem we're
having likely to be, in your opinion?
MR. THUROW: Well, I think we're going to go through a period of about a year when the
American growth rate is very low. Now, housing prices are falling and unemployment is rising, and
that makes it seem like a recession, even though probably in the end economists will technically say
it wasn't a recession.
MS. STAHL: Well, let me stop you right there. What does it matter about it being declared
NEWS TRANSCRIPTS, INC. - (202) 682-9050
31-40-20 Option
(1) Repeal bubble phase-outs and impose an explicit 3rd rate of
31% at levels where the bubble currently begins.
(2) Provide a 40% exclusion for individual assets (other than
collectibles) acquired after 9/30/90 and a 20% exclusion for
assets acquired before 10/1/90 (1 year holding period, full
recapture & AMT).
Because we have limited data on how the JCT would score a
prospective proposal, we are not confident that we can predict the
JCT scoring of this option. However, our best guess based on Table
90-3 113 (15 Sept. 90) and the March 27, 1990 JCT pamphlet is that
the JCT will score the option as approximately revenue neutral.
JCT distribution, as with all capital gains proposals, will show
larger losses. However, a distribution of change in taxes paid by
income classes should show an increase in taxes paid by the highest
income class.
31%/40%/23% AMT
(1) Repeal bubble phase-out and impose an explicit 31% third rate
at levels where the bubble currently begins.
(2) Provide a 40% (18.6% rate) exclusion for individual assets
(other than collectibles) (1 year holding period, full
recapture and AMT).
(3) Increase AMT rate from 21% to 23%.
Based on Table 90-3 113 (15 Sept. 90), the JCT should score this
option as raising money in the first year and should score it as
approximately revenue neutral to a slight loss over the period.
JCT distribution, as with all capital gains proposals, will show
much larger losses. However, a distribution of change in taxes
paid by income classes should show an increase in taxes paid by the
highest income class.
10% Surtax/45
(1) Retain current rate structure through the end of the bubble.
At the end of the current bubble, impose a temporary income
tax surcharge of 10%.
(2) Provide a 45% exclusion for individual assets (other than
collectibles) (1 year holding period, full recapture and AMT).
For the last Democratic offer, the JCT estimated that a 20% surtax
on most income above the bubble raised $44 billion over 5 years.
A 10% surtax on all income above the bubble should raise at least
$23 billion. Given that a 45% exclusion would lose $21 billion
against current rates and would lose less against current rates
plus the surtax, we believe that the JCT may score this proposal as
raising several billions. For further confirmation, compare E2 on
Table 90-3 113 (15 Sept. 90) which shows a 45% exclusion and 33%
rate (which is roughly equivalent to a 20% surcharge) to raise $29
billion over the period.
JCT distribution, as with all capital gains proposals, will show
losses. However, a distribution of changes in taxes paid by income
classes should show a significant increase in taxes paid by the
highest income class.
10% Surtax/45/22-1/2
(1) Retain current rate structure through the end of the bubble.
At the end of the current bubble, impose a temporary income
tax surcharge of 10%.
(2) Provide a 45% exclusion for individual assets (other than
collectibles) acquired after 9/30/90 and 22-1/2% for those
acquired prior to 10/1/90 (1 year holding period, full
recapture and AMT).
For the last Democratic offer, the JCT estimated that a 20% surtax
on most income above the bubble raised $44 billion over 5 years.
A 10% surtax on all income above the bubble should raise at least
$23 billion. Given that a 45% exclusion would lose $21 billion
against current rates and that item (2) of this proposal should
lose considerably less against current rates on JCT scoring, we
believe that the JCT may score this proposal as raising in excess
of $10 billion. For further confirmation, compare Proposal E2 on
Table 90-3 113 (15 Sept. 90) which shows a 45% exclusion and a 33%
rate (which is roughly equivalent to a 20% surcharge) to raise $29
billion over the period.
JCT distribution, as with all capital gains proposal, will show
losses. However, a distribution of changes in taxes paid by income
classes should show a significant increase in taxes paid by the
highest income class.
Growth, Job-Creation Incentive for Individuals
Purpose:
To encourage investment in new ventures, which are a primary
source of new employment. The proposal would make shares in new
ventures more attractive. It would lower the cost of capital and
encourage venture capital and other small business equity
investments.
A. Individual taxpayers would be permitted to deduct 25
percent of the purchase price of "qualified small business stock.'
Thus, for example, if qualified stock is purchased for $100,000, an
income tax deduction would be allowed for $25,000.
The amount of such deductions per year would be limited to
$50,000. The taxpayer's basis in the stock would be the purchase
price reduced by the amount allowed to be deducted.
$
Qualified small business stock would be defined as stock:
cost 10B
(1) first acquired by the taxpayer (directly or through an
underwriter) ;
(2) not issued in redemption of (or otherwise exchanged for)
stock or any other equity interest that was issued prior
to the effective date; and
(3) issued by a corporation with paid up capital of $50
million or less immediately after the issuance.
To qualify, the corporation must have been engaged in active
trade or business for at least 5 years prior to issuance (or, if
shorter, its period of existence), and must be engaged in an active
trade or business immediately after the issuance. Substantially
all the assets of the corporation must be utilized in active trades
or businesses. For purposes of this provision, a corporation
engaged in providing personal services, the holding or management
of real estate or passive investment activities will not be
considered an active trade or business. Appropriate attribution
rules would be adopted to prevent abuse.
The proposal is limited to common stock. Common stock issued
in exchange for debt or as a result of retiring debt would be
eligible.
There would be a recapture as income in a decedent's final
income tax return of amounts deducted within 2 years prior to death
to prevent deathbed purchases of qualified stock, coupled with a
step-up in basis to fair market value at death.
B. Increase R&D credit (including university basic research
$1.2B
credit) from 20% to 25%.
2
Offset: Reduce deduction for business meals and entertainment from
80% to 50%.
JCT estimate: +2.0 in 1991/+17.0 in 1991-95.
It is expected that the JCT will distribute the revenue loss
from proposal A primarily to high income taxpayers. Under JCT
distribution conventions, proposal B (which reduces corporate tax)
will not be distributed to individuals. The bulk of the offset
will also not be distributed for the same reason.
Growth, Job-Creation Incentive for Small Corporations
Purpose:
To encourage investment in new ventures, which are a primary
source of new employment. The proposal would make shares in new
ventures more attractive. It would lower the cost of capital and
encourage venture capital and other small business equity
investments.
A. Qualified small business corporations would be allowed an
income tax credit equal to 7% of the offering price for issues of
qualified small business stock. Appropriate attribution rules
would be adopted to prevent abuse.
Qualified small business stock would be defined as stock:
(1) not issued in redemption of (or otherwise exchanged for)
stock or any other equity interest that was issued prior
to the effective date; and
(2) issued by a corporation with paid up capital of $50
million or less immediately after the issuance.
To qualify, the corporation must have been engaged in active
trade or business for at least 5 years prior to issuance (or, if
shorter, its period of existence), and must be engaged in an active
trade or business immediately after the issuance. Substantially
all the assets of the corporation must be utilized in active trades
or businesses. For purposes of this provision, a corporation
engaged in providing personal services, the holding or management
of real estate or passive investment activities will not be
considered an active trade or business.
The proposal is limited to common stock. Common stock issued
in exchange for debt or as a result of retiring debt would be
eligible. The credit would be recaptured upon future redemption of
existing stock, payment of extraordinary dividends, or other
equity-reducing transactions.
B. Increase R&D credit (including university basic research
credit) from 20% to 25%.
Distributional Effect: Under standard JCT distribution
conventions, these proposals would not be distributed to
individuals.
LOW INCOME RELIEF IN DEMOCRATIC OFFER OF SEPTEMBER 17
Provisions
The Democratic offer of September 17 included two provisions meant
to provide tax relief for low income families: an increase in the
standard deduction of $150 on joint returns and $100 on single
returns, and a doubling of the earned income tax credit (EITC).
Neither of these provisions, in spite of their cost, is well
targeted to the lowest income families.
Increase in Standard Deduction
-- Many of the lowest income families have incomes too low to
benefit from the proposed increase in the standard deduction.
-- A low income single taxpayer receiving the maximum benefit from
the proposal would receive a tax reduction of only $15.
-- Virtually none of the tax reduction from the proposal would go to
families with incomes under $10,000, while nearly 45 percent of the
tax reduction would go to families with incomes of over $50,000 (see
attached chart).
Doubling of EITC
-- Many low income households would receive no benefit from a
doubling of the EITC. Among those that would not benefit:
Working poor with no children;
The elderly whose main source of income is Social Security or
Supplemental Security Income;
Families whose only source of income is from welfare.
-- The EITC currently does not adjust for family size, so the
proposal would provide disproportionate benefits to some recipients.
A single mother with one child working full time and receiving
the minimum wage would receive the same credit ($1,992) as would
a mother of three children working beside her.
-- Although a properly structured increase in the EITC may be
desirable, the large, untargeted increase in this proposal would
have undesirable consequences:
The proposal is not well targeted, providing over $1 billion in
annual tax relief to families with economic incomes over $30,000
(see attached chart).
The large revenue loss from the proposal would require
offsetting tax increases which could burden the same low income
families the proposal is meant to help.
For recipients in the phaseout range of the EITC, this proposal
would increase marginal tax rate by 10 percentage points,
discouraging work effort.
-- A sounder approach to expansion of the EITC was taken in the
Administration's offer of September 7.
A young child credit of up to $1,000 for each child under four
would be added to the EITC.
In addition, the child and dependent care credit would be made
refundable.
The lower revenue cost of this proposal would make it fiscally
possible to adopt an additional, more targeted relief
provision for the lowest income families (who typically would
not benefit from an expansion of the EITC).
Attachments
INCREASE STANDARD DEDUCTION ($150/$100)
(From Democratic offer of 9/17)
Annual Change in Tax Liability
1
Change in Liability ($ billions)
0.5
o
(0.5)
(1)
below 0
0-10
10-20
20-30
30-50
50-75
75-100
100-200
over 200
Income Class (FEI, $ thousands)
9/22
DOUBLE EARNED INCOME TAX CREDIT (EITC)
(From Democratic offer of 9/17)
Annual Change in Tax Liability
4
Change in Liability ($ billions)
2
0
(2)
(4)
below 0
0-10
10-20
20-30
30-50
50-75
75-100
100-200
over 200
Income Class (FEI, $ thousands)
9/22
YOUNG CHILD EITC & REFUNDABLE CHILD CARE
CREDIT* (From Administration's offer of 9/7)
Annual Change In Tax Liability
4
Change in Liability ($ billions)
2
0
(2)
(4)
below 0
0-10
10-20
20-30
30-50
50-75
75-100
100-200
over 200
Income Class (FEI, $ thousands)
*Fully Phased In
9/22
WHITE HOUSE FAX-5
FRI 08 SEP 90 01:11
PG.04
1
Attached is a table of revenue estimates for several proposals
which burst the bubble.
Under current law no one pays an average tax rate of over 28%
on the value of their taxable income plus personal exemptions
(although a taxpayer may pay an average rate over 28% on taxable
income). Although some taxpayers face a marginal tax rate of 33%
this simply represents a phasing out of the benefits of the 15%
bracket and personal exemptions.
If the top marginal rate is permanently extended at a rate
higher than 28% some taxpayers will pay an average rate higher than
28%. The attached proposals impose a cap to prevent any taxpayer
from paying tax at an average rate higher than 28%. Proposals A
and B apply the maximum 28% rate based to adjusted gross income
(Adjusted gross income is taxable income plus personal exemptions
plus itemized or standard deductions). Under this proposal some
taxpayers will pay a higher tax than under current law. These will
be taxpayers in the highest income brackets who have a lot of
itemized deductions. Proposals C and D apply the maximum rate to
taxable income. Under this proposal all taxpayers will receive a
tax decrease. Proposals E and F apply the maximum rate to taxable
income plus personal exemptions. Under this option, no one will
pay tax higher than under current law and many will have a tax
decrease. Proposal G is a straight 28% bubble burst.
Also presented in the table are the distributional effects of
the various proposals. The tax effect is divided according to
"Family Economic Income" (FEI). All members of a taxpayers family
are aggregated together and classified according to their total
family income from taxable and non-taxable sources. FEI is the
standard Treasury income classifier.
23
Ve.
Small-issue manufacturing bonds.
JCT
*
-.1 -.1 -.2 -.3 --
-.6
OTA
*
-.1 -.1 -.2 -.2 --
-.6
LE.
R&E allocation rules.
JCT
-.5 -.7 -.8 -.8 -.9 -- -3.7
OTA
-.4 -.7 -.8 -.8 -.9 --
-3.6
g.
R&E tax credit.
JCT
-.9 -1.2 -1.3 -1.4 -1.6 --
-6.4 5.5
OTA
-.5 -1.0 -1.1 -1.3 -1.6 --
-5.5
h.
Low-income housing credit.
JCT
-.2 -.4 -.7 -1.1 -1.4 --
-3.7
OTA
-.1 -.4 -.7 -1.0 -1.4 --
-3.6
i.
Targeted jobs tax credit.
JCT
-.1 -.2 -.3 -.4 -.4 --
-1.4
OTA
-.1 -.2 -.3 -.3 -.4 --
-1.3
√.
Business energy credits.
JCT
-.1 -.1 *
*
*
--
-.2
OTA
-.1 -.1 *
*
*
--
-.2
k.
Placed-in-service date for nonconventional fuels
(section 29).
JCT
*
*
*
*
*
--
*
OTA
*
*
*
*
*
--
-.1
1.
Orphan drug testing credit.
JCT
*
*
*
*
*
--
*
OTA
*
*
*
*
*
--
*
TOTALS:
JCT
-2.2 -3.2 -4.1 -4.9 -5.7 -- -20.3
OTA
-1.8 -3.4 -4.1 -4.8 -5.9 -- -19.9
65. Extend FUTA surtax. Effective 1/1/91.
JCT
.7 1.1 1.1 1.1 1.2 --
5.2
OTA
.8 1.1 1.1 1.2 1.2 --
5.4
How To H.T High Income
without RAISING
RATES
I LIMIT DEDUCTIONS AboVE AN INCOME Level
1. Schedule A
- MedicAL
- charitable
- ST. + LOCAL INCOME
REAL
- Property TAX
- Personal Property TAX
- MissellAnecus
2. Business Lesses on 1040
II PhASE out CAPITAL GAINS About
CERTAIN INCOMES
OLIMIT
III END All Deductions AbovE A CENTAIN
INCOME
IV TAX Now TAX-EXAMPT INCOME AbovE
A Certain INCOME
PERSONAL
V IN CREASE AMT
ENTITLEMENTS.
BYRD
ENTITLEM: - MIL.
}
+ 1.5.
+ 2 HARKINS, NUTRITION
TAX + gm B -8 - 8
+ INDEX 1 4.5
HI - 11.2 Rd. (+8)
BN - -3,5
LI/RD -2.
29.2.
PHONE 13.9
$9
ENERGY 15.3
58.7
V
29.2
1s 881.- > 2.
INDEX
-4.5.
81
D.H.I -14.
EITC
6.
21.8
ENERGY
6.6
40.3
S/L SS
11
11.7.
PHONE
10.9
INDEX
40.2
11
COLAS/TAX TAX 85%
7/20 For Cola
HI to 65K VS / AGI 3%
AMT
No HI. for 3% (200k).
TRANSMITTED FROM 7672041
09.25.90 14:23 P.01
*
TO. Jay, Neel
Irom: AARON
395-
4840
WATERFIELD SPOT -
Saddam Hussein invades Kuwait. President Bush responds
forcefully. America stands united behind Bush. Only a few
criticize the President. One of them is Bill Sarpalius.
Sarpalius said --quote-- "I wonder sometimes if some of
(the military deployment to Saudi Arabia) is political."
So Sarpalius thinks George Bush risks 200,000 American lives
for political gain. Almost every world leader criticizes
Saddam Hussein -- Bill Sarpalius attacks George Bush.
50% me Ans
costor
100
1000
500
100
1000
300
630
Parkner
3.7
New only
Renner
Ken Glear
1
System
70ley
40-20
carefor
Pressional
\
Receipon
MATHEMA
Recession
MEDICAND
6
S
ME
Withdrawal/Redaction Sheet
(George Bush Library)
Document No.
Subject/Title of Document
Date
Restriction
Class.
and Type
01. Memo
From Michael Boskin to John Sununu
9/28/90
Re: Possible tax rule change to spur investment and growth
(2 pp.)
Collection:
Record Group:
Bush Presidential Records
Open on Expiration of PRA
Office:
Chief of Staff, White House Office of
(Document Follows)
Series:
Sununu, John, Files
Subseries:
Issues Files
By IP (NLGB) on 10/28/05
WHORM Cat.:
File Location:
Budget Summit [1990] [4]
Date Closed:
12/16/2004
OA/ID Number:
29138-006
FOIA/SYS Case #:
1998-0004-F[1]
Appeal Case #:
Re-review Case #:
2005-0426-S
Appeal Disposition:
P-2/P-5 Review Case #:
Disposition Date:
AR Case #:
MR Case #:
AR Disposition:
MR Disposition:
AR Disposition Date:
MR Disposition Date:
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P-1 National Security Classified Information [(a)(1) of the PRA]
(b)(1) National security classified information [(b)(1) of the FOIA]
P-2 Relating to the appointment to Federal office [(a)(2) of the PRA]
(b)(2) Release would disclose internal personnel rules and practices of an
P-3 Release would violate a Federal statute [(a)(3) of the PRA]
agency [(b)(2) of the FOIA]
P-4 Release would disclose trade secrets or confidential commercial or
(b)(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
(b)(4) Release would disclose trade secrets or confidential or financial
P-5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
(b)(6) Release would constitute a clearly unwarranted invasion of
P-6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
(b)(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed of
(b)(8) Release would disclose information concerning the regulation of
gift.
financial institutions [(b)(8) of the FOIA]
(b)(9) Release would disclose geological or geophysical information
PRM. Removed as a personal record misfile.
THE CHAIRMAN OF THE
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON
September 28, 1990
MEMORANDUM FOR GOV. JOHN H. SUNUNU
FROM:
MICHAEL J. BOSKIN mms
RE:
Possible tax rule changes to spur investment and
growth
I. Increase the expensing limit in the corporate tax from the
current $10,000 to $100,000 or more (perhaps up to one million
depending on revenue and other features.)
Pro
This would reduce the cost of capital since expensing,
immediate first year write-off of investment, increases the present
value of depreciation deductions. It would cost very little over
the 5-year budget horizon for years 1, 2 and 3 and only a modest
amount in years 4 and 5, (although it would lose revenue thereafter
when we would hope to have the budget under control.) For example,
in the first year, expensing a mainframe computer, rather than
depreciating it over five years, would have no impact on the five
year revenue estimate, it would just accelerate the tax deducations
during the 5-year period.
2. Such an increase would help in the cash flow of small and
medium size businesses in addition to its effect on the cost of
capital. It might particularly benefit investment in the sectors
that are lagging such as computers and autos. It would simplify
the corporate tax system for the small and medium sized businesses
that would not have to keep track of elaborate depreciation
systems. It would equalize tax rates on all types of investments
covered (an alleged philosophical cornerstone of tax reform.)
Con
Revenue Loss-Expensing accelerates tax deductions in all
years and thus raises the present value of tax loss due to
depreciation deductions
I do not know how the tax writing committee will react to
expensing. They will probably prefer it to an ITC, but may balk
on other grounds. They may balk because "it is sweetening capital
cost recovery". It is my own personal opinion--although not one
shared by Treasury-- that for many industries current tax
depreciation substantially understates true economic depreciation
because it does not account for technological obsolesence. Good
examples include electronics and biotechnology.
2
Would ultimately have to be accompanied by some limitation on
interest deductions to make sure that effective tax rates could not
become negative.
II. 25 percent deduction for investment and new start-up ventures
under the individual income tax. This is the proposal you
mentioned.
Pro
This in principle could encourage investment in new ventures
and would have the effect of reducing the capital gains tax rate
from 28 percent to 21 percent for those who sold existing assets
to invest in such ventures.
Con
It would be very difficult to prevent funds from flowing into
a lot of non-productive new ventures which were organized solely
to take advantage of this new provision (e.g. a lot of
professionals would incorporate or change corporate structure to
classify as new venture).
III. 25 percent (or some percentage depending on revenue loss),
dividend exclusion to individuals.
Pro
Reduces double taxation of dividends, tax bias against equity,
and cost of capital.
Con
Revenue loss
IV. Rapid growth firm package: Extend the current loss carry
forward period from seven years to a much larger number: allow R
& D tax credit to be carried forward with interest, repeal or
modify the disallowance of tax loss carry forwards for firms with
more than a 50 percent change in their equity ownership.
While these would all involve some revenue loss, it would be
beneficial for very rapidly growing firms whose basic nature
implies losses in the first few years of their existence
(particularly high technology firms because they are R & D
intensive.)
These are meant to supplement the list already under
discussion.
THE WHITE HOUSE
WASHINGTON
September 28, 1990
MEMORANDUM FOR GOVERNOR SUNUNU
FROM:
LARRY LINDSEY
SUBJECT:
Revenue Effects of Indexing
The following is an example of why traditional capital gains modelling would
tend to underestimate the revenue effects of indexing.
Assume an investor owns a number of shares of two stocks, Stock A (an old,
stagnant investment) and Stock B (a fast growth stock).
Purch.
Years
Infl.
Current
Indexed
Capital
Indexed
Price
Held
Since
Price
Basis
Gain
Gain
Purch.
Stock A $100
10
100%
$200
$200
$100
$0
Stock B $100
1
10%
$120
$110
$20
$10
The investor needs close to $600 right away. He can sell either 3 shares of
Stock A or 5 shares of Stock B.
Under current law, assuming a 28% marginal rate, taxes would be:
1) Stock A: 3 shares X $100 X .28 = $84.00
2) Stock B: 5 shares X $ 20 X .28 = $28.00
The investor would choose to sell Stock B. The data base we use for revenue
simulation does not indicate that the investor owns A, only that he sold B.
Therefore, our revenue analysis would show a current law revenue baseline of
$28.
Then, we simulate new law alternatives. Ignoring behavior, the simulation of
a 30 percent exclusion would indicate a revenue loss of $8.40, or 30 percent
of the revenue currently collected.
The simulation for indexing shows a revenue loss of $14 without a behavioral
response. That estimate is based on the sale of 5 shares of B under the new
set of tax rules.
Of course, in both the indexing and exclusion, behavior would lower the
estimated revenue losses, or perhaps lead to revenue gains as the taxpayer is
assumed to sell more shares of stock B with a lower tax penalty.
Our objection to this is that an additional form of taxpayer behavior is
involved when indexing becomes available. Consider the taxpayer's
fundamental decision: how to raise $600 with minimum tax liability.
1) Stock A: 3 shares X $ 0 X .28 = $ 0.00
2) Stock B: 5 shares X $10 X .28 = $14.00
Now the investor would choose to sell stock A (which we didn't know anything
about on our data tape) rather than stock B. The revenue loss from going to
indexing is not $14, as estimated before, but $28. Total revenue is reduced
to zero.
September 28, 1990
POSSIBLE REVENUE ITEM MODIFICATIONS
1. LUXURY TAX
1st Choice:
O
Delete provision
2nd Choice:
a.
Raise boat threshold to $50,000
b.
Raise fur threshold from $500 to $5,000
C.
Add additional items -- for example: polo
ponies, art work, silver, antiques, oriental
rugs, etc.
d.
Impose tax at border so that American business
does not lose sales abroad -- i.e., when
jewelry, art, etc. purchased abroad is brought
into the U.S., customs collects the 10 percent
tax or reports transaction to IRS.
e.
Eliminate from the proposal electronic goods,
perhaps with the exception of electronic
entertainment equipment (big screen
televisions, large stereo systems).
f.
Need to clarify whether business use autos,
planes excluded.
2. INSURANCE
a.
Reduce aggregate industry contribution under
DAC
b.
Watch annuity share -- proposal should be lower
than 1.75 percent of premiums for annuities,
the $10 billion figure.
3. ETHANOL
a.
If there are either extenders or any energy
incentive package, include extension to 2,000
4. RAILROAD RETIREMENT PENSION FUND TAX INCREASE
a. Railroads will be hit by a number of proposals
-- estimates on this item have fallen --
request to eliminate proposal from list.
5. DETERMINE IF DEMOCRATIC OFFER STILL CONTAINS
O
Increase in tax on asset revision from defined
benefit plans -- the Administration has serious
problems with Metzenbaum proposal - if
included.
THE WHITE HOUSE
WASHINGTON
September 28, 1990
MEMORANDUM FOR GOVERNOR SUNUNU
FROM:
LAWRENCE B. LINDSEY
SUBJECT:
Insurance Company Taxation
It is my understanding that the proposals now under
consideration will adjust Acquisition Costs to reflect the
financial accounting principles of insurance companies, it will
not make offsetting changes in the tax accounting of reserves.
Example:
Three year policy.
$100 premium each year.
$120 acquisition expenses
$150 benefit at end of year 3.
Under G.A.F.A.P.
Year
1
2
3
Premium
100
100
100
Acquisition
40
40
40
Reserves
50
50
50
Profit
10
10
10
Under Current Tax Law
Year
1
2
3
Premium
100
100
100
Acquisition
120
Reserves
75
75
Profit
-20
25
25
Under Proposed Tax Change
Year
1
2
3
Premium
100
100
100
Acquisition
40
40
40
Reserves
75
75
Profit
60
-15
-15
-2-
Note that a good case can be made that insurance companies
are undertaxed under current law. However, the proposed change
will lead to overtaxation.
I stress that I am not privy to the details of the
legislative proposal and am quite willing to stand corrected.
However, my sources tell me that it would be unlikely that an
additional $2 billion per year could be raised if appropriate
changes were made to both acquisition expenses and to reserves.
CC: Roger B. Porter
Michael J. Boskin
CAPITOL OFFENDERS
A Budget Reform to Stop Congress from Breaking the Law
REPRESENTATIVE CHRISTOPHER Cox
Wi
ith the October 1 commencement of another fiscal
intended to break the law. This may shock most
year, the prospects for sane congressional management
Americans, but in fact it is routine business in
of our federal budget are gloomier than ever. Already,
Washington. Speaker Wright pledged in January 1989
fiscal 1991 appropriations are far higher than last year's;
that the House would complete work on the required 13
and the crisis in the Persian Gulf-which has increased
appropriations bills by the August recess. The law re-
current military spending and renewed congressional
quires final action on these bills by June 30.
willingness to spend on the national defense-has only
Imagine the consequences if you were to ignore the
added to the seemingly hopeless mismatch of revenues
April 15 deadline for filing your income tax return. Yet
and expenses. Worse, even were the budget summit
when it comes to more than S1 trillion in annual spend-
between Congress and the president to yield some grand
ing, that is precisely what Congress is now doing-and
solution to bring this year's numbers closer into balance,
has been doing routinely throughout each of the 16 vears
we would still have to deal with next vear's, and the
since the passage of the 1974 Act. This violation of the
year's after. And the dismal truth is that history is not
law mav have reached its apogee with the utter mis-
on our side.
management of the fiscal 1990 budget, during the course
Yet, the federal government's financial problems are
of which the Congress violated every legal deadline; and
not nearly so intractable as they first appear. The chronic
the current year's process seems destined to continue
failure to balance the budget is simply the inevitable
that infamous record.
result of a pooriv designed congressional budget process,
In place of the process mandated by law, the congres-
which not only permits but encourages violation of the
sional leadership has built a totally extra-legal system
very laws designed to force rational choices among com-
whose complexity and incomprehensibility shield it from
peting priorities. The current process guarantees waste-
effective public scrutiny. Virtually no member of Con-
ful spending and financial chaos.
gress-let alone the public-even reads the huge spend-
ing bills the Congress adopts. As if in an annual ritual,
Outlaw Jim Wright
the president routinely faces a take-it-or-leave-it decision
Not least among the reasons that the system is subject
on a hastily crafted omnibus continuing resolution or
to manipulation and abuse is that very few people un-
1th-hour reconciliation bill running into the thousands
derstand how it works. Even within the Congress itself,
of pages and comprising virtually all federal spending
terms like "current services baseline," "section 302(b)
for the entire year. The use of such measures has effec-
allocation," and "undistributed offsetting receipts" often
tively vitiated the president's veto authority, since signing
produce blank stares. The budget committees, whose
them is the only alternative to closing down the United
members at least have the incentive and opportunity to
States government.
understand the process, are powerless to enforce its
Such a system serves only the interests of those who
requirements on the appropriations committees (which
seek to guarantee that government spending is literally
often spend in seeming disregard of budget guidelines),
uncontrollable, and who assert that the only alternative
on the Congress as a whole, or even on themselves. The
to massive and ever-increasing deficits is massive and
Congressional Budget and Impoundment Control Act
ever-increasing taxation. This was not, however, the in-
of 1974, which sets out the current process, is routinely
tention of those who drafted and passed the 1974 Act.
ignored; and there is no remedy at hand to enforce it.
Rather, this law represented an effort to place taxing and
As in the Old West, the man with a gun can make his
spending decisions within the context of an overall
own law, and the current congressional leadership is
budget.
doing just that.
On my very first day in Congress, then-Speaker of the
REPRESENTATIVE CHRISTOPHER Cox (R-CA) is co-chairman
House Jim Wright announced from the chair that he
of the House Task Force on Budget Process Reform.
38
Policy Review
Failure of the 1974 Act
contain a bias in favor of spending restraint that
Until 1974, Congress never voted on a budget. Then,
could be overcome only if both the president and Con-
as now, the federal "budget" was simply the sum of the
gress wish to do so; and
separately enacted annual appropriations bills, along
protect individual members of Congress against the
with whatever financial commitments had been placed
political fallout from tough spending decisions by plac-
into law in prior years. To rectify this, the 1974 Act
ing the burden to cut spending on the process rather than
established the House and Senate Budget Committees,
on specific legislators.
and provided for an annual budget to be adopted bv
To accomplish these objectives, the 1974 Act should
Congress. The act required the passage of a non-binding
be amended to establish three related reforms. Congress
first concurrent resolution on the budget early in the
should be required to enact a simplified budget, in the
budgeting year, and a binding second concurrent resolu-
form of a legally binding joint resolution (as opposed to
tion toward the end of that year. Additionally, it was
the present non-binding concurrent resolution), before
intended that the second resolution would be enforced
any spending legislation can be considered. As a joint
through reconciliation instructions that would require
and not a concurrent resolution, the budget would be
the various congressional committees to report to the
floor whatever legislation was necessary to achieve the
established targets. (In practice, Congress simply came
to ignore the requirement that it pass a second budget
Imagine the consequences if
resolution, and the requirement of two resolutions was
done awav with altogether in the first Gramm-Rudman-
you were to ignore the
Hollings law, enacted in 1985.) Finally, the act set up a
legally binding timetable to ensure the timely adoption
deadline for filing your
of individual spending bills.
Certainly, providing for a floor vote on overall budget
income tax return. Yet
targets, mandating the timely adoption of spending bills,
and enforcing overall budget limits through reconcilia-
Congress has ignored its
tion represented positive steps. It is thus not for lack of
a workable concept, but rather of effective enforcement
deadlines for 16 years.
mechanisms, that the 1974 Act has failed to bring order
and coherence to the budgeting process and failed to
bring discipline to congressional decisions to spend
monev.
presented to the president for his signature or veto, and
would thus be more likely to reflect a decision on overall
Premises of the Cox Plan
government spending that combines the priorities of
To repair the broken-down congressional budget
both the president and Congress.
process, we must design a system with teeth in it to make
Second, the budget process should contain enforce-
sure that Congress doesn't again abandon it for some
ment mechanisms that will keep Congress within its
less-restrictive expedient. Beginning as a member of
budget ceilings for all spending except Social Security
President Reagan's Working Group on Budget Process
and the interest on the debt. Also needed is a sustaining
Reform, and now as co-chairman of the House Task
mechanism that would be triggered in the event Con-
Force on Budget Process Reform, I have developed a
gress and the president fail to act. SO that the federal
comprehensive proposal to rewrite the 1974 Act that
government will not be shut down because of political
would do just that. This new plan is based on the
deadlock.
premises that an effective budget process must:
These are the basic elements of the Budget Process
encourage early consultation and cooperation be-
Reform Act, which, together with other members of the
tween Congress and the president;
House Task Force on Budget Process Reform, I will soon
produce decisions on overall budget levels early in
be introducing in Congress.
the budgeting year;
be evenhanded with respect to the president and
A One-Page Budget
Congress, not giving either an advantage in dealing with
The Budget Process Reform Act would require that
the other or in establishing spending priorities:
Congress enact a legally binding budget (in the form of
tie each individual spending decision to an overail,
a joint resolution) by May 15 of each year. Until the
binding budget total;
budget is signed into law, no authorization or appropria-
require explicit decisions on spending levels for all
tions bill could come to a vote in either house. The
federal programs, not just those arbitrariiv deemed "con-
budget would set ceilings on all federal spending (except
trollable";
Social Security and interest on the debt) for the coming
prevent actual or threatened annual shut-downs of
fiscal year. It would fit on a single page-setting specified
the federal government;
ceilings on government spending within the 19 summary
be as simple as possible in concept and means of
categories currently used in the budget. Because the
implementation, so that the process is clear and under-
budget would contain only 19 numbers, it is far more
standable to Congress and the public;
likely that the Congress and the president could agree
not raise difficult questions of constitutionality;
at this high level of abstraction on how much the federal
Fall 1990
39
government should spend in the ensuing fiscal year.
provide a powerful tool to hold the Congress to the
Numerous government programs and activities would be
budget choices it makes. Thus, for example, if Congress
aggregated within each category, so that wrangling over
wished to enact an appropriation that, together with
the more detailed breakdown presently required in the
other appropriations in the particular budget category,
president's budget submission could be avoided. (The
would exceed the budgeted ceiling for that category, this
president's budget in its present form would continue
would subject all appropriations in that category to a
to be provided, but only after passage of the budget law.
two-thirds vote. Likewise, if Congress and the president
Just as now, the Congress would not be bound by its
failed to enact a budget, then all authorizing and ap-
specifics.)
propriating legislation would require a supermajority for
The budget enacted by Congress would also set ceil-
passage. The only way to adopt spending proposals by
ings for spending on entitlement programs. If the budget
simple majority would be to authorize and appropriate
set a ceiling below the projected program outlays for the
within the ceilings of a duly enacted budget law.
upcoming year, Congress would be required to effect a
reconciliation with the budget ceiling by amending the
No More Blank Checks
organic statute for the entitlement program so as to meet
Second, Congress would be required to determine the
the new ceiling.
desired level of spending for each federal program ex-
The result would be the establishment of a binding
cept Social Security and interest on the debt. Open-
budget, jointly reached by the Congress and the presi-
ended, "blank-check" appropriations-such as those for
dent early in the budgeting year.
entitlement programs, which authorize the spending of
"such sums as may be necessary"-would be banned.
The Two-Thirds Requirement
Under the current system, anv member of Congress
To end the sad spectacle of congressional law-break-
who seeks to cut spending on entitlements must intro-
ing, the act contains three enforcement mechanisms to
duce legislation and obtain an affirmative vote to do so.
ensure that its provisions are observed, making it more
But anvone who wishes to increase spending on any
likely that federal spending will be contained within the
program with an open-ended appropriation need only
agreed-upon ceiling.
sit back and watch it go. By requiring the Congress to
First, Congress would be permitted to enact spending
decide how much it is willing to spend on a program
legislation in excess of the budget ceilings only by a
during the coming fiscal period. the new act will level
supermajority vote-two-thirds of both houses. Such a re-
the plaving field for spending cuts and spending in-
quirement would be constitutional: Article I, section 5,
creases. At the same time, it should be emphasized,
cl. 2 of the Constitution gives each house of Congress
requiring fixed-dollar appropriations for all federal
programs will not in any wav mandate reductions in
entitlements. Congress would be able to decide to spend
as much as it wants on entitlement programs. It would
The binding one-page budget
simply have to make that decision with every budget.
Entitlement programs are not "uncontrollable," mere-
and its enforcement
ly uncontrolled. While the specifics often vary program
by program, virtually all open-ended entitlements re-
mechanisms can protect
quire that payments be made to any person or unit of
government that meets eligibility requirements estab-
members of Congress from
lished bv law. All persons who meet the program's
eligibility requirements receive benefits to which they
some of the political
are "entitled"-regardless of the aggregate cost in any
fiscal period.
consequences of tough
Agency-Adjusted Benefits
budget decisions.
But there is nothing requiring that entitlement
programs have open-ended appropriations. Indeed,
Senator Richard Lugar proved that fixed-dollar ap-
propriations can be used for entitlement programs with
the power to determine its own rules. And although
his amendment to the Food Stamp program. As a result
unprecedented in statute, two-thirds majorities have
of the Lugar Amendment, the Food Stamp program
been required by the rules of the Senate. Senate Rule
operates from a fixed-dollar annual appropriation, but
22, for example-as amended in 1949-required the
nevertheless entitles eligible households to receive cer-
affirmative vote of two-thirds of the entire membership
tain levels of benefits. If the Secretary of Agriculture
to end a filibuster.
concludes that projected outlavs will exceed the amount
The requirement of a supermajority for spending
appropriated, he or she is required to recalculate the
outside of a budget would provide a strong incentive for
allotment to which each household will be entitled in
both the president and Congress to reach agreement on
order to keep expenditures within the statutory ceiling.
the budget, since neither-although perhaps for dif-
Following this model, the new act authorizes the heads
ferent reasons-would wish to be in the situation where
of the relevant cabinet departments and agencies to
all spending requires a supermajority vote. It would also
adjust benefit levels and eligibility requirements when-
40
Policy Review
ever entitlement spending exceeds the dollar amount
Office, not the Office of Management and Budget, would
actually appropriated by Congress.
be the "scorekeeper" for determining whether particular
authorization and appropriations measures are consis-
President as Enforcer
tent with the budget ceilings, and consequently whether
Third, with respect to any spending in excess of the
the supermajority vote or rescission authority
budget ceilings, the president would be granted enhanced
mechanisms are applicable. A supermajority vote would
rescission authority-that is, authority to rescind the over-
be required for any spending legislation that would
budget portion of any spending unless Congress were to
exceed the budget ceiling for one of the 19 budget
enact legislation expressly disapproving the specific res-
categories.
cission. This authority would be applicable only to the
To make sure Congress doesn't "sandbag" the process
over-budget portion of proposed spending; the presi-
by withholding action on critically important programs
dent, in other words, would simply be enforcing
that can easily command a two-thirds vote, while filling
Congress's own budget decisions, as enacted into law.
up a category piecemeal with less urgent spending
The president would also be granted authority to effect
proposals, passage of the first over-budget spending
rescissions of any spending authorized or appropriated
would subject all spending legislation in that category to
in excess of the previous year's funding levels in the event
a supermajority vote. And, to permit the CBO to evaluate
no budget were enacted.
individual spending proposals when Congress has failed
To maintain the integrity of congressional control
to act on an entire category, the supermajority require-
over the legislative process, the Congressional Budget
ment would also be triggered in the event that outlays
How Congress Broke the Law with the 1990 Budget
LEGAL DEADLINE
ACTION REQUIRED BY LAW
RESULT
January 9, 1989
White House budget due.
Submitted, as required by law, January 9.
February 15
Congressional Budget Office to submit report
CBO violated the law: report not submitted until
to budget committees.
February 23.
April 1
Senate Budget Committee to report
Senate violated the law: not reported until April 19.
concurrent resolution.
April 15
Congress to clear concurrent resolution on
Congress violated the law: not cieared until May 18.
budget.
May 15
Appropriations bills allowed in House.
House violated the law: first appropriation bill not
considered until June 28.
June 10
House Appropriations Committee reports last
House violated the law: as of June 23, only one
annual appropriation bill.
committee markup complete.
June 15
Congress completes reconciliation legislation.
Congress violated the law: reconciliation bill not
cleared until November 22.
June 30
House completes action on 13 annual
House violated the law: only one was passed on time.
appropriations bills.
House action was not completed until November 20.
July 15
Committees required by budget resolution to
Congress violated the law: fully half of committee
have submitted instructions for reconciliation.
instructions were late.
October 1
Fiscal year begins.
Congressional failure to act caused Gramm-Rudman
ax to fall.
October 16
Under Gramm-Rudman, automatic cuts of
Late reconciliation bill keeps the meat-ax hacking for
$16 billion in defense, domestic programs
more than four months-until February 8, 1990.
take effect.
Sources: Congressional Quarterly, Library of Congress, United States Code
Fall 1990
41
for a specific program under consideration, when added
the Congress and the president do absolutely nothing.
to the inflation-adjusted previous year's outlays for all
The government does not shut down, and the Congress
other programs within the category, would exceed the
is not tempted to lay at the president's feet the night
budget ceiling in that category. The president's rescis-
before October 1 a mountainous appropriations bill that
sion authority would apply to any spending for which a
he cannot read and must sign if he wishes to avoid
supermajority vote was required.
shutting down the government.
These three enforcement mechanisms-the super-
majority vote, fixed-dollar appropriations, and enhanced
A Politician's Dream
rescission authority for the president-ensure that the
The problems of runaway spending and lack of ac-
budget process will no longer be ignored. They do not,
countability are not new-they're simply getting worse.
however, weaken the congressional power of the purse.
Now, our huge federal borrowing is threatening to in-
Once a budget has been enacted, these mechanisms
crease interest rates and inflation, and to destroy the
place procedural barriers in the way of only that spending
overall health of the economy. The amount of taxes each
that would exceed the limits to which Congress and the
of us will pay next year, the cost of our home loans and
president have already committed themselves by law.
car payments, our career opportunities, the value of our
retirement savings-all are dependent on whether Con-
Averting a Shutdown
gress finally tames the budget beast. No longer will it
The final element in the Budget Process Reform Act
suffice to consider one or two discrete repairs to the
is the sustaining mechanism-an automatic continuing
process, such as a line-item veto or new Gramm-Rudman-
resolution. In the event Congress fails by October 1 to
Hollings targets. While such reforms are needed, only a
complete action on appropriations for any program or
comprehensive rewrite of the 1974 Act will go to the
activity, the previous year's funding level would automat-
heart of the problem: an undisciplined, out-of-control
ically be reappropriated for the upcoming fiscal year.
budget process.
This mechanism has the virtue of avoiding the temporary
There is reason to be sanguine about the near-term
prospects for this proposed comprehensive reform of the
budget process. Like Representative Dick Armey's base-
closing commission and the Gramm-Rudman-Hollings
Rescission authority would
sequester, the binding one-page budget and its enforce-
ment mechanisms can protect members of Congress
apply only to the over-budget
from some of the political consequences of tough budget
decisions. The procedures themseives can take the heat
portion of proposed
for any unpopular spending cuts that might become
necessary in order to meet the budget. First, because the
spending: the president would
budget ceilings are adopted early in the process and at
a macroeconomic level, voting for a responsible budget
simply be enforcing
will be politically less difficult than voting against specific
spending bills. Even more important, the enforcement
Congress's own budget
and sustaining mechanisms-supermajority vote, rescis-
sion authority, automatic continuing resolution-will
decisions, as enacted into law.
permit politicians to say "yes" while the system says "no."
That is a politician's dream. So for those in Congress
who are concerned about the deficit, but who are un-
willing to make an unpopular decision, the Budget
shutdown of the government for lack of funds, while
Process Reform Act is ideal. The majority party of Con-
providing an additional incentive for Congress and the
gress should also presumably be interested in an act that
president to authorize and appropriate through the
would permit them to determine spending priorities with
budget process. Unlike the Gramm-Rudman sequester,
just a majority vote.
this continuing resolution would apply to all spending,
I believe a majority in the Congress could be per-
except Social Security and interest. A freeze at the prior
suaded to vote for a thoroughgoing reform of the 1974
year's levels would be a result that both branches will
Act. An encouraging sign was the recent 279-150 vote
wish to avoid, since each is likely to feel that there are
in the House of Representatives in favor of a constitu-
some important accounts that should be dealt with dif-
tional amendment requiring a supermajority vote for an
ferently than in the previous year. An added virtue of
unbalanced budget. The time has arrived for this bipar-
this sustaining mechanism is its bias in favor of spending
tisan coalition of fiscal conservatives to go further and
restraint. If no action is taken, spending does not in-
address the root causes of our budget crisis. If we are
crease from year to year.
successful in bringing budget process reforms to a vote,
The sustaining mechanism is not the preferred means
the nation will discover for certain whether the Congress
of determining federal spending levels, but rather is a
is serious about its responsibility to the taxpayer, to our
form of disaster insurance against the contingency that
economy, and to future generations of Americans.
42
Policy Review