House Votes To Rescind Tax Increase

Friday, July 28th 2000, 12:00 am
By: News On 6

WASHINGTON (AP) — House Republicans headed to their presidential convention with another tax cut in their pocket — the repeal of a 1993 measure that has meant higher taxes for millions of Social Security recipients.

The legislation, passed 265-159 Thursday with the help of 52 Democrats, was the last major bill the House finished before Congress adjourned for the summer and the two national presidential nominating conventions. Republicans meet in Philadelphia next week; Democrats convene next month in Los Angeles.

The Social Security tax break came on the heels of a series of GOP-led initiatives to cut inheritance taxes, taxes on some married couples, a phone tax and taxes affecting health care and business.

President Clinton, as he has with the inheritance and marriage tax bills, said Thursday he would veto the Social Security measure because it undermines fiscal discipline and takes away resources needed for education and other priorities.

``They have passed reckless tax cut after reckless tax cut after reckless tax cut, to drain away our hard-earned surplus and put us back in the red,'' he said in remarks in the Rose Garden.

Thursday's bill rescinds a tax increase that was part of a major deficit-reduction package the White House put together in 1993 — without a single Republican vote in favor — to make a dent in what was then a budget deficit heading toward $300 billion. Vice President Al Gore, in his role as president of the Senate, cast the tie-breaking vote for that package, and Republicans were quick to label the Social Security provision the ``Gore Social Security Tax.''

``Unlike Mr. Gore, we don't think it's right for seniors who earn more than $34,000 per year to pay taxes on up to 85 percent of their Social Security benefits,'' said House Speaker Dennis Hastert, R-Ill.

The tax was first imposed during the Reagan administration and in 1993 was increased from being applicable to 50 percent of benefits to 85 percent for individuals with incomes of more than $34,000 and couples with incomes of $44,000.

The Republican bill would return it to the 50 percent level, at a cost of more than $100 billion over 10 years. Revenues from the tax go to the Medicare trust fund and losses from the tax break would come from the budget surplus.

The increased tax now affects some 9 million seniors and the number is expected to go up sharply in the future with the rise of seniors with larger incomes.

A Democratic substitute, defeated 256-169, would have raised the threshold for the 85 percent of benefit tax to $80,000 for individuals and $100,000 for families.

Democrats said their bill would cost $40 billion less over 10 years and, unlike the GOP bill, would be effective only as long as the budget surplus is sufficient to cover losses to Medicare.

In the Senate, Sen. Spencer Abraham, R-Mich., sponsor of companion Social Security tax legislation, said he had urged the Finance Committee to include his bill in tax relief legislation that Congress will consider this fall.

House Republicans on Thursday also dressed staffers up as a bride and groom and put them in a car decked out with streamers and tin cans to deliver the marriage penalty tax bill to the White House.

The bill would reduce income tax for millions of married couples, including 25 million who pay higher rates than they would if they were single, but the Clinton administration says the cost — $292 billion over 10 years — is too high and the measure is overly generous to richer Americans.

Last year Clinton vetoed a $792 billion GOP tax cut package. This year, Republicans, changing strategy, have offered their tax bills in piecemeal fashion. But Democrats said that added together they still total some $733 billion over a decade, close to last year's level, and that they consume far too much of future budget surpluses that are needed for education and health programs.

``Passage of all these tax cuts together will take us right back to the deficit spending and the red ink we had in those years'' of the 1980s and early 1990s, House Democratic leader Dick Gephardt of Missouri said.

But House Ways and Means Committee Chairman Bill Archer, R-Texas, said that with the budget now solidly in surplus it was not right to tax the benefits of senior citizens. ``Social Security checks should not arrive in the mailbox with a bill from the IRS attached,'' he said. ``It's unfair, it's unnecessary and it harms the retirement security of millions of Americans now and in the years to come.''


The bill number is H.R. 4865.

On the Net: bill summary:

Joint Committee on Taxation: