April 13, 2000
The Administration strongly opposes H.R. 4199 because it would create
substantial risks for the Nation's economy and the American people. At a
time when our country enjoys the strongest economy in a generation, it
would be irresponsible to put that economy, our country's fiscal
discipline, and the well-being of its families at risk. If H.R. 4199 were
presented to the President, his senior advisors would recommend that he
veto the bill.
The Administration stands ready to consider carefully all proposals for comprehensive tax reform. The President has set forth four criteria to evaluate reform plans: fairness, fiscal responsibility, positive impact on economic growth, and simplification. However, the proposal contained in H.R. 4199 provides no reform plan whatsoever.
The Administration believes the proposal to sunset the tax code is deeply flawed and, if enacted, would harm the Nation's strong economy. For example, some families would likely refrain from buying homes due to the uncertain future tax treatment of mortgage interest and property taxes (as well as all other State and local taxes), which would harm current homeowners. Many businesses would hire fewer workers and make fewer capital investments because of uncertainty about how taxes would affect the return on productive assets. Furthermore, the uncertainty of the bill's effect on future receipts would raise the specter of massive Federal deficits which, in turn, would increase interest rates and weaken or destroy economic growth. H.R. 4199 could actually undermine tax reform; it would force Congress to consider "must-pass" legislation to replace or extend the code, giving advocates of special interest provisions greater leverage in demanding that unwarranted new tax breaks be the price of allowing legislation to move forward.
H.R. 4199 would have many other harmful effects on the well-being and long-term decisions of families. A family's health insurance would be threatened because the tax status of employer-provided health benefits would be uncertain. Hope Scholarships, which make higher education more affordable for students, would be in jeopardy, as would the child tax credits that help families with the costs of child-rearing. The structure of employer-provided pensions and tax incentives for retirement could be altered in ways that could harm retirement income security. The uncertainty surrounding the future of these and other tax incentives would significantly complicate financial and other decisions for virtually every American family.
H.R. 4199 would affect receipts; therefore, it is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990. Beginning after 2004, the bill would terminate both Federal income taxes -- corporate and individual -- in addition to eliminating most other sources of Federal revenue. Because the bill establishes no alternative Federal tax system and contains no offsets, it would reduce Federal receipts by hundreds of billions of dollars beginning after FY 2004. Under the Budget Enforcement Act, this bill would trigger a massive sequester of Federal programs with a broad range of unacceptable consequences.