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 | HOUSE WAYS AND MEANS COMMITTEEOctober 16, 1996The Future Congress |
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NewsHour Coverage of Ways and Means Issues
Read the Online NewsHour's backgrounder on the tax issue.
Oct. 3, 1996:
Browse an Issue & Debate on the Tax system.
March 7, 1996:
Paul Solman reports on the history of the tax system and of the anti-tax movements.
Jan. 17, 1996:
Jack Kemp and a Treasury Official debate flattening the U.S. tax system.
"Debate Night" debate between Republican and Democratic House and Senate leaders.
Outside Links
The House Committee on Ways and Means.
Read about the Committee's history and jurisdiction.
Visit The Internal Revenue Service -- for free!
Two things are guaranteed in life, the saying goes, Death and Taxes. In an election year there is a third: promises of a tax cut. This year is no different. Republican Bob Dole has made his 15 percent across-the-board income tax cut the centerpiece of his campaign. President Bill Clinton has promised "targeted" tax cuts that are focused on education, health care and investment. Even during PBS's Debate Night broadcast, Senate Majority Leader Trent Lott and House Minority Leader Dick Gephardt found common ground:
REP. GEPHARDT: Well, again, I think we can agree on tax cuts. What I'd like to ask is--
SEN. LOTT: We can agree on tax cuts?
REP. GEPHARDT: Yeah, I think we can.
SEN. LOTT: We've got something here, Jim.
When all the talk and promises are over, there is one committee in Congress that will debate what the tax policy of the U.S. will be: the Committee on Ways and Means. The First House of Representatives in 1789 formed the Ways and Means to fulfill Article I, Section 7 of the Constitution that reads, "All bills for raising Revenue shall originate in the House of Representatives." Since 1789, the House Ways and Means Committee has served as the chief tax writing committee for all of Congress. If Dole wins the presidency, it will be Ways and Means that will vote on his 15 percent cut.
William Archer currently chairs Ways and Means. A conservative Republican from Texas, Rep. Archer was one of the chief architects of the tax cuts proposed in the Contract with America. During the 104th, Chairman Archer worked to pass many of the tax cuts and balanced budgets that were vetoed by the Presdient. Archer has said, "My ultimate goal is to replace the income tax with a tax on the consumption of goods and services. However, while we are stuck with the current system, I want to do all that I can to improve it."
Sam Gibbons (D-FL) has served as the Ranking Democrat on the Committee in the 104th.
Yet this year, Gibbons decided to retire, leaving New York Congressman Charles Rangel in line to assume the top Democratic spot. Rangel is an outspoken critic of the proposed Republican tax cuts and of the Welfare reform bill signed by the President. During the 104th Congress, Rangel spoke out against a proposed balanced budget amendment. He told Republicans, "You have the votes to pass anything you want in taxes. But I warn you, do not mess with our Constitution."
Questions asked in this forum:
- Achievements of the Ways and Means Committee during the 104th? Agenda for 105th?
- Financing proposed tax cuts
- Who's economic plan is truly "conservative"?
- Is there an optimum tax rate?
- Capital gains tax cuts
A question from the Online NewsHour editors:
What are the major achievements of the House Ways and Means Committee in the 104th Congress? What do you think the agenda of the committee should be in the 105th Congress?
Rep. Archer responds:
In the 104th Congress, the Ways and Means Committee reduced the deficit, reformed Welfare, increased access to health care, and provided tax relief to small businesses so they can grow and create more jobs for the American people.
In the 105th Congress, our goal will be to bring tax relief to the American people as we balance the budget, and I'll continue my efforts to abolish the income tax and remove the Internal Revenue Service from the daily lives of working Americans. In addition, we must pass a bipartisan plan to save Medicare from bankruptcy, continue our efforts to make welfare reform work, and expand free trade opportunities that create jobs in the United States.
Rep. Rangel responds:
The first bills the Ways and Means Committee passed in this Congress were a tax cut for the wealthy funded by a $270 billion cut in the Medicare program, a radical welfare bill that would have thrown millions of children into poverty, and provisions that allowed companies to raid their workers' pension assets. The Contract with America was a disaster for the Republican-led Congress, a failure for the Americans who elected them and a waste of time for the Committees who worked on those bills.
In the 105th Congress, the first priority should be legislation that extends the solvency of the Medicare trust fund. In the last Congress, the Democrats proposed legislation to extend the solvency of the trust fund, with all of the cost-savings to be put back into the Medicare program, not used as a piggy bank to finance tax cuts for the wealthy, as they were in the Republican Congress. That legislation should be the starting point of our efforts in the next Congress.
Also, to remain competitive in the world economy, the Federal government, local communities and American businesses must join in a partnership to create a highly trained workforce. There are changes that we can make to our tax system to encourage that partnership and cultivate a first-rate, high-tech work force which all Americans can participate in. For example, Congress can provide a permanent tax exemption for the cost of education provided by employers to their workers.
A question from Catherine Crawford of San Jose, CA:
I teach at a local Jr. College in my area and the following question came up for review by one of my students (who, incidentally, holds a Ph.D. in History and was a social worker at the time of the Depression) We would like to know how Clinton and/or Dole intend to finance their tax cuts. Furthermore, if current program budgets will be reduced in order to finance tax cuts, then which programs are likely to be at risk? Thank you for any information can you share on these topics.
Rep. Rangel responds:
Bob Dole's tax proposal would blow up the deficit, balloon interest rates and undermine the good faith efforts in reducing the size and cost of government that President Clinton, Vice President Gore and Congressional Democrats began in 1993. He has not specified how he will pay for his proposal but it is so expensive - twice as expensive as the Contract with America tax cut - that he would have to cut Medicare or Social Security to pay for it.
Contrary to the contempt Dole rightly expressed for supply-side economics during his 35 years in Congress, as a candidate he now relies on those same "trickle-down" theories to pay for over one quarter of his $550 billion tax proposal. With your student's expertise in history, he or she may recall our nation's last failed experiment with "trickle-down economics": The Federal budget would be in balance today but for the interest on the debt rung up in the 1980's.
Clinton's tax proposals are targeted to middle income families and focused on education. Because Clinton's tax cuts are not extended to the wealthy, the cost is not dramatic- $98 billion over seven years, $60 billion of which is paid for by cutting corporate welfare and enforcing our current tax law. The remaining cost can be made up without severe or unwise reductions in any of our vital programs. Americans want modest, targeted tax cuts which allow us to continue on our path of reducing the nation's deficit, and nurture opportunity and hope through education, training and jobs - and Clinton's proposal gives us that.
Rep. Archer declined to answer
A question from James Murdock of Silver City, NM:
I hear Clinton's economic plan is to be one of maintaining the trend in deficit reduction with relatively minor adjustments in taxation and spending. I hear Dole's proposal is to contain tax reductions aimed at stimulating growth, to increase tax revenues and major overhaul of the tax code and public expenditures. Clinton's message sounds more conservative (dictionary definition) than Dole's. Which is the conservative economic plan?
Rep. Archer responds:
The main difference between the two plans is that Senator Dole believes that since the taxpayer earns the money, he or she should be able to keep more of it. By letting people keep more of what they earn, we will be forced to shrink the size of government.
Senator Dole is calling for a 15 percent across the board tax cut while President Clinton is calling for a net $64 billion tax increase over the next ten years. The reason for President Clinton's tax increase is that the bulk of his tax cuts are temporary, but his tax increases are permanent.
There is nothing conservative about maintaining the status quo of big government based on more spending resulting in higher deficits. According to the Congressional Budget Office, unless Congress and the President agree to new spending restraints, the progress we have made on the deficit will soon be reversed. Starting next year, the deficit will begin to explode again thanks to the spiraling growth of entitlement spending.
I think we can balance the budget by entering into agreements on spending restraints. I continue to think the American people are overtaxed and that we must provide tax relief as we balance the budget.
Rep. Rangel responds:
If, by conservative, you mean prudent and wise, President Clinton's tax proposal is just that. His tax reductions are targeted at middle-income families and families who want to send their children to college. His tax cuts give American families the break they need without sacrificing vital programs or our progress on reducing the deficit.
A question from George Wiggans of Bowie, MD:
The discussion of tax cuts often seems to ignore the need for tax revenue. I understand that the U.S. currently has a low tax rate internationally. Do economic models really demonstrate the benefits of tax cuts claimed by their supporters? Is there a percent of GDP collected in taxes that is the maximum to avoid undesirable depression of business activity?
Rep. Rangel responds:
You're right. Among the 24 industrialized nations, the U.S. ranks lowest in tax burden. The last experiment we conducted in relying on the "trickle down" benefits of large tax cuts was in the Reagan era. At that time, some Republican economists predicted that huge economic growth would occur. As history revealed, this was a disaster. Real economic growth was more than a third lower than what Reagan's economists predicted and, if not for the Reagan tax cuts, our budget deficit would now be zero.
Bob Dole has a group of economists who, like the Reagan economists, believe that his tax reductions, together with the required dramatic cuts in programs like Medicare and education, would increase economic growth. This reasoning doesn't make economic sense or even common sense. Most economists believe Dole's proposal will result in a substantial increase in the deficit, an increase in interest rates, and little or no "trickle-down" effects to pay for the tax cuts. At a cost of over $1.1 billion over 10 years, Senator Dole's tax plan could prove devastating.
Rep. Archer declined to answer
A question from Barry Cox of Richmond, IN:
Both Dole and Clinton promise to eliminate or reduce the capital gains tax on the sale of a home. Should I hold on to my home until after the election in hopes that they will make good on their promise? How soon could these changes be enacted?
Rep. Archer responds:
I would strongly discourage you from basing any type of personal decision on what the next Congress may or may not do. While both President Clinton and Senator Dole have made similar proposals in reducing the capital gains tax on homes, there are many variables that must be accounted for. The last Congress passed legislation that would have dramatically reduced the capital gains tax but unfortunately, the President vetoed the legislation.
I hope we will be able to cut capital gains taxes and I will fight to do so. But I would hesitate to get into the personal financial advice business.
Rep. Rangel responds:
Since there is broad bipartisan support for this proposal, I predict there will be early action on this in the 105th Congress. Proposals like this should have been enacted last year but the Republicans were too hell-bent on passing their failed extremist agenda.
Will McDonald of Santa Fe, NM
I am impressed with Mr. Dole's sudden generosity after being so stingy for so long. But I was concerned that the wealthy would be getting so much more in a 15% tax cut.
Why not just give everyone in the country $200. or so? It would come out to be about the same dollar-wise and it would feel oh-so egalitarian.
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Nancy Young of Boston, Mass.
I have a question regarding the oft-stated campaign claim that Bill Clinton raised my taxes. In fact, my taxes have lowered. In addition, I've gotten a 70% salary increase over the past 3 1/2 years. Granted, I'm not making as much as a Congressman or woman, but as a lower-(I guess)-middle-class person, I have no argument with the results of my president's economic policies. Is it only the rich people who are feeling the pinch? What gives with the claim that my taxes have gone up? They haven't!
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Archie McDougald of College Station, TX
As a college student, I find these tax proposals very confusing. Is it possible for these proposals to be made understandable for everyone. What I personally find is that these tax ideas proposed are presented in a very clouded and cluttered form, with no clear stand on any position. For example, educational spending. This affect me personally so I try to be as informed as I can. If the new budget cuts educational spending then what gets cut. Is it new schools, existing school improvements, or special projects, or something I'm not even aware of. Some of my college friends are on the verge of getting kicked out of school because of not having any money to pay for tuition and fees or even books. It's not their fault that they don't have any money they are just young adults that don't have well paying jobs and their parents have no money to give them because they have siblings that are still in high school. Or their parents money is split between them and their siblings who are in college too. Recently the Houston Chronicle published a listing of all the School districts in the greater Houston area and their rating in various categories from SAT scores to Population Count, Drop out rates, and Low Income percentages. I was appalled at how two schools in the same district could have such different numbers. This can't be based on the students themselves. I believe that if given the opportunity every student could succeed. Although almost every single school listed, showed improvement in most categories, the percentiles were lower than I thought they should be.
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Joseph A McDonald of Burlington, VT
Why are you against a Constitutional amendment to balance the budget? I, too, love the Constitution and am reluctant to see it changed. But I also know it was written over 200 years ago, before automobiles, telephones, radios, airplanes, birth control, income taxes, and before the concept of political pork. Our founding fathers could not have foreseen the economic, social and political conditions that exist today.
Isn't it true that Congress cannot stop promising more and more aid and entitlements to constituents and that the budget probably never will be balanced? The political will (and courage) just isn't there. It is clear to me that anyone against a balanced budget amendment is against a balanced budget.
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Paul Harte of Hoboken, NJ
Rep. Bill Archer's ideas on taxes unfortunately represent the minority in this country, unless the opinions of most mainstream economists count for anything.
Taxes are a penalty, and it does not make sense to penalize people for doing what society hopes they will, and that is to work and be productive. Unfortunately, we reward people by allowing them to spend their money freely, and punish them by taxing their savings earnings.
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Gary Richie of Atlanta, GA
There has been a great deal of talk for 10 - 15 years about instituting a national sales tax or other form of consumer tax. Since 1960, year in and year out, the revenue necessary to operate the Government has run about 18 - 19% of the national gross. Aside from doing a poor job educating the public about how much service that money provides, the Government has not done too badly by most of us. If the source of revenue to fund the Government is suddenly changed, we will be faced with paying a consumer tax in the neighborhood of 18 - 19%. Now, how will that affect homebuying if 18% of the down payment goes toward a consumer tax?
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Ron Machmer of Fairfax, VA
One of the stats. that we always hear, is that Americans have a poor rate of savings compared to other countries. We could improve this rate by limiting the taxes on interest earned. No taxes should be paid on interest less than $5,000.00.
Savings
The only reason I'm in a Mutual Fund is because the interest rate at banks and credit unions are so low. Why haven't banks interest rates that they pay us for savings accounts, matched their interest rates that they charge us for loans? Many people are risking their futures on The Market, instead of a steady, guaranteed savings.
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Karen Silver of the Bronx, New York
What is The Dole Tax Cut proposal going to cost? I'm not talking about dollars but in the human services, first of all--i.e. programs--and in the old alliance between the people and their government. There is a kind of fiduciary relationship between the American people and the government wherein the people trust their government to run what is essential to the quality of life we count as our birthright as Americans. That means environment, it means education, it means defense and it means a reasonable chance to participate in the democracy. Is the Dole tax cut a hoax? Can the government run? Will it be possible to provide the baseline guarantees of a decent life for children and the elderly that they deserve and still cut taxes 15%. Can anyone give me an honest accounting of the figures involved, free of campaign hype, which will allow me to think about this issue intelligently. Right now, I feel as if Dole thinks I'm an idiot. He keeps throwing out the line "15%" as if, by repe- tition it will become an article of faith. But my intellect rebels at this approach and I reject it. Can you account to the people for this so that we can all think rationally about it?
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Mr. J. R. Kintzele of Fort Myers, Fl
I've watched the President and the Vice President talk non-stop about their targeted tax incentives. Let me tell you that they will NO effect on me or my business. I employee 20 people and have already put my children through college. ( all FSU Grads ). The only break I will ever get is if we do away with this horrible tax code. The presidents plan has little or no effect on people in my position. I could site more specific examples but suffice it to say we cannot have the Clinton Gore method. We need the Dole Kemp approach.
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Larry Schwab of Lafayette, IN
The question is not whether the Federal Government can afford giving the American people a tax cut. The question is properly: "What part/parts of the government are they going to eliminate to not only provide for the 15% tax cut proposed by Dole, but also balance the budget THIS YEAR?"
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Roger Erguson of Portland, OR
I think taxes should be raised on the upper brackets. Reagan's promise of lowering taxes to stimulate investment and economic growth to eliminate the deficit was a miserable failure. Tax the rich, decrease Defense speeding, reduce the deficit and move therefore toward a more egalitarian society.
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