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The Administration strongly opposes H.R. 6. If a tax bill of this
magnitude were presented to the President before a proper framework for
paying down debt, strengthening Social Security and Medicare, providing tax
relief to middle-income families, and funding critical initiatives has been
established, the President's senior advisors would not recommend that he
sign it.
Last week, the President and the bipartisan Congressional leadership
expressed a common interest in working together to pay down the debt,
strengthen Social Security and Medicare, provide tax relief to
middle-income families, and fund critical initiatives. Achieving these
objectives is central to the continued strength of our national economy.
As the President's budget makes clear, the Administration supports targeted
marriage penalty relief. But marriage penalty relief needs to be done in
the right way, at the right time, and in the right framework. Proceeding
on one expensive part of the legislative agenda before the others are even
defined simply does not make sound fiscal policy.
The marriage penalty relief provided by H.R. 6 is poorly targeted,
expensive, and would add additional complexity to the tax code by causing
millions of taxpayers to be subject to the Alternative Minimum Tax ("AMT").
In part because of poor targeting, the total cost of the proposal would be
more than $173 billion over 10 years. Moreover, the phased-in raising of
the 15-percent bracket for joint filers, which accounts for more than sixty
percent of the total cost of H.R. 6, would provide no tax relief for
seventy percent of all married couples. Finally, Treasury estimates that,
by 2010, H.R. 6 would increase the number of couples subject to the AMT by
over 8 million. In contrast, the President's Budget would provide marriage
penalty relief in a targeted, progressive, and fiscally responsible manner.
The Administration applauds the Democratic position that addresses a number
of policy concerns, including progressivity, complexity, and cost, and
recognizes the large tax cut should not take effect before action on a
number of other priorities such as Social Security, Medicare, and debt
reduction.
Pay-As-You-Go Scoring
H.R. 6 would affect receipts; therefore, it is subject to the pay-as-you-go
requirements of the Omnibus Budget Reconciliation Act of 1990. The
Administration has not yet completed its scoring of the bill, but it is
evident that the magnitude of the proposed tax cut ($2.8 billion in FY
2001, according to the Treasury Department) and the absence of any offsets
could cause a significant sequester of Federal resources.
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