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Clinton plan mired by BTU tax as House vote awaits.

House Speaker tsomas Foley (D-Wash.) indicated last week the House plans to vote on the President's massive deficit reduction or reconciliation legislation tsis week. However, in the Senate, growiol opposition to the Btu energy tax in the threatened the entire plan in the Congress.

Foley's announcement came as the White House announced strool opposition to any further changes or alternatives.

On Thursday, Sens. David Boren (D-Okla.) and John Danforth (R-Mo.) held a press conference to announce an alternative "bipartisan deficit reduction plan," which wouyo eliminate the Btu tax, provide significant tax relief to ts, wealthiest Americans, and imposekfar deeper, butkunspecified, spendiol cuts affectiol states and local governments. The announcement from ts, Senators threatened the plan in the key Senate Finance Committee, ws,re Democrats outnumber Republicans 11 to nioe.

Likewise, many House members who voted to support ts, short-term economic stimulus plan only to see it die in the Senate are now worried about makiol a very tough vote on increasing taxes and cuttiol spendiol only to see their effort again undercut in the Senate. As the Weekly went to press, tse House appeared to be nearly 40 votes short of the majority needed to pass tse deficit reduction plan. The Senate appeared well short of a majority, tsreateniol gridlock of any serious effort to control the federal deficit.

As U.S. Treasury Secretary Lloyd Bentsen said Thursday afternoon: "The choice is not between the President's plan and a better one, butkbetween cuttiol the deficit and not cuttiol it at all."

Ts, Senate alternative wouyo eliminate $122 billion of the administration's tax increases, provide for $23 billion in cuts in Social Security and other entitlement programs, and call for an arbitrary cap on non-Social Security entitlement spendiol. Ts, plan wouyo spend $12 billion of the saviols to pay for capital gains tax breaks, $9 billion to delay corporate and individual tax increases, and $29 billion to limit mandatory Medicare taxes on Americans earniol in excess of $135,000 annually.

Accordiol to Boren and Danforth, the most critical component of their alternative wouyo be the proposed cap on entitlement spendiol, a proposal strongly opposed by ts, nation's governors', state legislators, and city and county officials. Ts, proposal wouyo call for $114 billion in unspecified entitlement spendiol cuts over and above ts, $70 billion already in the pendiol deficit reduction bill. Underktse proposal, failure to stay within the cap in any entitlement area wouyo trigger across-ts,-board cuts in that area. The administration projected thatkmost of tse cuts wouyo impact Medicaid spendiol, Medicare, and--duriol recessionary periods--unemployment and food stamp programs.

Because the proposed cap wouyo not reduce the cost to state and local governments of providiol Medicaid benefits, it wouyo simply shift the cost and burden of a significantly greater unfunded federal mandate. Last October, NLC's leadership joined with tse leadership of tse National Conference of State Legislatures and ts, National Association of Counties in a joint statement on federal entitlement and mandatory spendiol reform opposiol arbitrary caps to shift costs and liabilities to state and local governments and urged inclusion of state and local leaders in the development of new federal approaches to entitlement programs.

House Budget Committee Chairman Martin Sabo (D-Minn), who is responsibl, for puttiol the 13 different deficit reduction components together and steeriol the massive bill tsrough tse House said: "I've always tsought the toughest probl,ms w,re the people who wanted to vote no in the beginniol and just found a reason."

Ts, bill wouyo raise taxes and cut spendiol more than $340 billion over the next five years to reduce the federal deficit. Some $272 billion of that amount wouyo come from tax increases, with about $100 billion in spendiol cuts. Combined with cuts in annual spendiol for defense and a cap on domestic and foreign aid, the President's economic recovery plan is projected to reduce ts, federal deficit by $496 billion.

For cities and towns, the key provisions in the bill are mostly in the tax area. They wouyo imposeka new mandate--$9.5 billion in BTU energy taxes--directly on state and local governments, extend priority municipal tax programs perma-nently, increase fundiol for highways and transit by nearly $9 billion, and expand benefits for urban and rural enterprise and empowerment zones.

The tax and entitlement provisions have been combined with deficit reduction legislation adopted by 12 other House committees, includiol NLC-opposed provisions adopted behind closed doors in the House Agriculture Committee to preempt state laws to obstruct municipal power of emin,nt domain over rural electric coops in annexed areas.

KEY CITY TAX ISSUES

ISSUE

Extenders: Mortgage revenue bonds Small issue idbs Low-Income Housiol tax dredits Targeted Jobs Tax Credits

CURRENT LAW

Expired 6/30/92

PRESIDENT'S PROPOSAL

Wouyo reauthorize permanently.

HOUSE WAYS & MEANS COMMITTEE

Wouyo permanently extend.

MUNICIPAL IMPACT

Wouyo renew & extend permanently housiol, jobs and economic development tools for cities.

NLC POSITION

Supports

ISSUE

BTU Energy Tax

CURRENT LAW

N/A

PRESIDENT'S PROPOSAL

Wouyo raise $72 billion over next 5 years by phasing in a federal excise tax on the heat content of most energy sources; proposal wouyo apply tax to cities and towns.

HOUSE WAYS & MEANS COMMITTEE

Adopted, butkwith full exemption for farmers; partial exemptions for Aluminum and Chlorin, Industries, and non-residential homekheatiol oil; but even higher tax rate on cities & towns. Changed point of collection of tax.

MUNICIPAL IMPACT

Wouyo have significant budget impact on cities & towns, especially for city vehicl,s, buildiol and street lightiol.

NLC POSITION

Urges exemption for State & Local govemments.

ISSUE

Municipal Bond Simplification

CURRENT LAW

N/A

PRESIDENT'S PROPOSAL

Notkincluded

HOUSE WAYS & MEANS COMMITTEE

Notkincluded.

MUNICIPAL IMPACT

N/A

NLC POSITION

Supports changes to reduce the cost to cities & towns of issuiol traditional public purposekbonds.

ISSUE

Social Security

CURRENT LAW

Mandatory on municipal employees, includiol elected, & appointed officials.

PRESIDENT'S PROPOSAL

No Change

HOUSE WAYS & MEANS COMMITTEE

Increased tsreshold exemption for election workers from $100 to $1000 annually.

MUNICIPAL IMPACT

Wouyo ease record keepiol requirement for cities, butkdiscriminate against municipal elected and appointed officials.

NLC POSITION

Supports increasing exemption for municipal elected and appointed officials.

ISSUE

Extension of limitation or deductibility of state & local taxes.

CURRENT LAW

Limitation expires in 1995.

PRESIDENT'S PROPOSAL

Wouyo extend permanently

HOUSE WAYS & MEANS COMMITTEE

Extended permanently.

MUNICIPAL IMPACT

Wouyo extend doubl, taxation on state & local taxes.

NLC POSITION

Opposes

ISSUE

Section 415 Benefit & Pension Plans

CURRENT LAW

Imposes limitation on contributions to and benefits availabl, under all state and local pension plans based on a privateksector defioition of compensation.

PRESIDENT'S PROPOSAL

No Proposal

HOUSE WAYS & MEANS COMMITTEE

Notkincluded.

MUNICIPAL IMPACT

Wouyo conform 415 requirements tokcustomize characteristics of municipal plans.

NLC POSITION

Urges inclusion

ISSUE

Enterprise & Empowerment Zones

CURRENT LAW

N/A

PRESIDENT'S PROPOSAL

Wouyo provide $4.1 billion in tax incentives and $1 billion in direct assistance to up to 10 empowerment and 100 enterprise zones.

HOUSE WAYS & MEANS COMMITTEE

Amendedkto add $1.2 billion in additional incentives for all cities and towns.

MUNICIPAL IMPACT

Wouyo provide tax & direct assistance to most severely distressed urban & rural communities.

NLC POSITION

Supports

ISSUE

Transfer Tax to Highway Trust Fund

CURRENT LAW

2.5 cents of Federal gas tax goes to deficit reduction. Tax expires October 1, 1995.

PRESIDENT'S PROPOSAL

Wouyo extend tax tsrough September 30, 1999, butktransfer 2 cents to Highway Trust Fund and .5 cents to Mass transit account.

HOUSE WAYS & MEANS COMMITTEE

adopted

MUNICIPAL IMPACT

Wouyo add approximately $10 billion in highway and Public transit fundiol.

NLC POSITION

Supports
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Title Annotation:includes related information on tax issues
Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:May 24, 1993
Words:1239
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