JIM LEHRER: All right.
SEC. ROBERT RUBIN: --problem with the child tax credit.
JIM LEHRER: All right.
SEC. ROBERT RUBIN: And that is that in the second five years the child care--the dependent child care credit, which working mothers now get for home care, will be organized in such a way against a child tax credit that for every dollar of the dependent care credit that they get, they lose 50 cents of the child tax credit. So that a working mother will be worse off than a mother that stays at home. We do not think that's right.
JIM LEHRER: All right. You're with him in concept but against him on specifics?
SEC. ROBERT RUBIN: We're with him on the child tax credit; we're with him on both of those very important specifics that adversely affect lower income people and adversely affect working mothers.
JIM LEHRER: All right. Education tax credits and deductions. The congressman says $31 billion over five years.
SEC. ROBERT RUBIN: The education tax credit and deduction that the President has proposed is a program that will better enable middle income people to send kids to school and better enable hard-pressed middle income people to keep their kids in school. The Archer proposal substantially changes what the President proposed, and as the President said, it is not consistent with the budget agreement.
Basically what he's done has taken the tax credit that the President has--a $1500 tax credit--which is, roughly speaking, equal to the average cost at community college--and he's organized it in such a way that if you go to a community college, you cost $1500, instead of getting a $1500 tax credit, as you would under the President's proposal, you get $750. It adversely affects people who go to community colleges and provides a full credit only to people who go to more expensive schools. And it completely eliminates the deduction, the tax deduction for higher education, which the President also proposed.
JIM LEHRER: So that's a bad problem, from your point of view?
SEC. ROBERT RUBIN: It is I think a very serious problem.
JIM LEHRER: Capital gains cut from 28 to 20, 10 percent for those families making $41,000 or less. What's your position on that?
SEC. ROBERT RUBIN: I think the issue on the capital gains tax cut is a complicated one. Almost all economists, regardless of where they are in the spectrum, say that a capital gains tax cut is unlikely to increase savings very much and probably will have relatively little effect on investment. As a consequence, if all of that is true, and I believe it to be true, it will have relatively little effect on economic growth, therefore, the money that you're spending on it is going to produce growth in the economy that is nowhere near commensurate with the cost in the federal government.
I do not think it's a good proposal. Having said that, there's likely to be a capital gains tax proposal because the majority of Republicans want it. But what you shouldn't do is provide a double benefit for capital gains, and that's what the Archer proposal does. It's not only low as the rates but also has indexing. We think indexing is a very serious mistake.
JIM LEHRER: His explanation, you don't buy his explanation that he just gave to Paul?
SEC. ROBERT RUBIN: I don't believe, Jim, that a capital gains tax cut is going to contribute significantly to economic growth. We've had a marvelous five years in the economy. We've had it because the President put in place a powerful deficit reduction program in 1993, open markets around the world, and that is what has driven our economy.
The stock market has more than doubled, and it's done all of this without a capital gains tax cut. I do not think it's going to contribute, but if you are going to have one, you certainly shouldn't have a double capital gains tax cut, both a reduction in the rates and indexing. In our judgment, indexing is the one that should not happen.
JIM LEHRER: All right. But you're willing to go on the capital gains because you have no choice?
SEC. ROBERT RUBIN: Jim, I don't think it should be there, but I think it is likely that if everything else can get worked out--
JIM LEHRER: Okay.
SEC. ROBERT RUBIN: --it will be there. And I think we can construct a very good tax package for the American people.
JIM LEHRER: We'll get to the--
SEC. ROBERT RUBIN: Even though we may have something in it we don't like.
JIM LEHRER: Okay. Now, the estate or death tax--raise the exemption from $600,000 to a million dollars along the lines that Congressman Archer wants.
SEC. ROBERT RUBIN: I think it's not an unreasonable thing to do. We would prefer Tom Daschle, Sen. Tom Daschle's proposal, which would keep the $600,000 number at the level it currently is but would provide additional protection for people who sell small family-owned farms and family-owned small businesses, which is where I think the most serious problem arises right now on death.
JIM LEHRER: Just in general terms, do you agree with Congressman Archer that the estate tax is basically unfair?
SEC. ROBERT RUBIN: No, I really--I really think you're getting into a very important, and I think actually profoundly important social issue: Do we want each generation to basically have equality of opportunity but then in some fair measure at least have to make it on its own, or do we want to say that if Generation One has done extraordinarily well economically, then Generation Two should be able to live off of what Generation One has done? I think that we have about the right balance right now. We let people pass on some but not all.
JIM LEHRER: All right. Now, the increase on the native American gambling and commercial taxes, what do you think about that proposal?
SEC. ROBERT RUBIN: Well, there has been a policy, and I think a correct policy, in favor of Indian commercial operations as a way really of compensating for the very difficult conditions that native Americans have found themselves in, and I do not think that that is a sound proposal.
JIM LEHRER: But that's a social policy, rather than a tax policy, and you report it, is that right?
SEC. ROBERT RUBIN: It is a social policy for a very badly disadvantaged group in our society, a group that has suffered as a consequence of the history of our country. And I think that it is very much in the interest of native Americans, but I think our country more generally, native Americans to get back into the economic mainstream, and this is a policy designed for that purpose.
JIM LEHRER: How about eliminating the subsidy for ethanol?
SEC. ROBERT RUBIN: I'm not sure what I think on that at this point, Jim. As Mr. Archer said, it's--it was originally designed for a particular purpose, and I think we could probably go either way on that. We did not, ourselves, choose to put that in as a raiser in our--in our--we had a program as well of tax raisers, of fixing loopholes and subsidies in order to raise money to fund part of the tax cuts that we're recommending. We did not choose that particular one.
JIM LEHRER: All right. Now, in general terms, we heard what Congressman Archer said. Now, we've heard what you said on the specific--
SEC. ROBERT RUBIN: He left out a very important one he has in his.
JIM LEHRER: All right. What's that?
SEC. ROBERT RUBIN: He first greatly reduces and then eliminates the alternative minimum tax for corporations. And as you may remember, sometime ago an alternative minimum tax was created for corporations because a lot of large companies were doing quite well and at the same time paying very small or no taxes. And the technical reason was because of the difference between accelerated depreciation and straight line depreciation.
Forget the technical explanation. The point is that a goodly number of very profitable companies were paying either very small taxes or no taxes. That was deemed to be unfair, and the consequence was the alternative minimum tax. Under Chairman Archer's proposal, that alternative minimum tax for corporations would first be reduced and then eliminated. We think that that produces very little, if any, economic good. It is very expensive, and we think the cost of that should be--the AMT should stay in place, companies should continue to pay their fair share of the taxes, and the cost that we save by doing that should be put back into the programs that help middle and lower income Americans.
JIM LEHRER: Okay. Add that in. What have you got generally in terms of the possibility of a deal here with Chairman Archer and the Republicans?
SEC. ROBERT RUBIN: I think we have got a real problem, Jim. The President has proposed for a long time that we have middle and lower income tax cuts that were good both for low and middle income people and this--
JIM LEHRER: I'm talking about the rate. Lowering the income tax rate?
SEC. ROBERT RUBIN: No, no. He has proposed education incentive through tax credits and tax deductions.
JIM LEHRER: Which are in here, which are part of it?
SEC. ROBERT RUBIN: Yes. But his are very different than ours, and they're also smaller.
JIM LEHRER: All right.
SEC. ROBERT RUBIN: His are much more skewed toward more expensive institutions. Ours are more directed toward people who go to community colleges, although they could also be used for four-year schools. We proposed a program to help people save through an IRA, and we proposed a child tax credit for the very reasons the Chairman said, but I think by the other two provisions that he's put with the child tax credit, he's moved them away from benefitting lower income people and middle income people, and he's moved them away from helping working mothers.
So when all is said and done, I think what he has created is a package that in almost every component has moved away from helping middle and lower income people, where we think the help is most needed, and toward more affluent people. And as the President said, that just doesn't seem to make sense for the country at this point.
JIM LEHRER: So difficult times lie ahead?
SEC. ROBERT RUBIN: We believe with the program that we have designed, it's not only good for low and middle income people, it's also very good for the economy.
JIM LEHRER: Difficult times lie ahead?
SEC. ROBERT RUBIN: Well, we want to work with the committees. We want to work with Congress. The President very much wants to sign a tax bill that is in the interests of our country, which means helping middle and lower income Americans and also promoting economic growth, and I'd like to be optimistic and think that we can work that out.
JIM LEHRER: Sen. Lott said today--we had it in the News Summary--that the administration needs to learn how to compromise.
SEC. ROBERT RUBIN: Oh, I think the administration has worked very effectively with the Congress this year, and consequences. We got the chemical weapons treaty approved, and we got a budget agreement, and I think we all have to work together in a constructive spirit. I hope and trust we will, but I do think that our objective ought to be to continue the kind of economic growth we've had over the last five years, and to do so in a way that predominantly favors the people who were so disadvantaged in the 1980's, middle and lower income Americans.
JIM LEHRER: Mr. Secretary, thank you.
SEC. ROBERT RUBIN: Jim, thank you. It's been good being with you.
ROBERT RUBIN, Treasury Secretary: Jim, good to be with you, as always. 
