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Congress, White House pull back on tax cut plans for this year.

House Republicans, after meeting with House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) last week, announced there would be no action on a major tax cut before this session of Congress adjourns. The announcement came one day before the administration announced that it would not seek any capital gains or other tax cuts this year.

The announcements marked a victory for city leaders concerned that the proposed tax cuts would have hurt cities and towns by increasing the federal deficit and foreclosing reinvestment in hometown America.

The decisions came as the president's Office of Management and Budget officially announced last year's federal deficit had set a new record of $268.7 billion--more than $40 billion more than any other federal deficit ever recorded. The administration has predicted that next year's decicit will be well in excess of $340 billion.

The actions came as efforts to wrap up this session of Congress by Thankgiving accelerated--impacting a number of key city and town issues:

[section] Growing reservations in the Congress and the White House to a major tax bill also reduced the chances of successful action to either simplify the tax code as it affects tax exempt municipal bonds, such as NLC-supported HR 710, or to extend key, expiring tax provisions, such as mortgage revenue and small issue idb bonds, and low income housing and targeted jobs tax credits. All expire at the end of the year unless extended by Congress.

[section] Efforts by city leaders to return closed military bases to severely impacted surrounding communities appeared in jeopardy.

[section] City and town efforts to receive compensation for natural disasters remained uncertain, but a House-passed aid bill threatened across-the-board cuts in all priority municipal programs.

[section] A third Congressional effort to extend unemployment benefits appeared to be headed towards resolution with support for a compromise from the White House.

The actions came as Congress agreed to a second continuing funding resolution to keep the federal government in operation until November 14 and the administration testified that the Soviet Union will need emergency federal assistance before Congress adjourns. The funding resolution is to provide temporary appropriations until either Congress completes action on pending legislation, or the president signs other appropriations bills passed by Congress--including the Transportation funding bill.

Base Closing Effort in Trouble

On the military front, while there have been no public meeting between House and Senate conferees on the Defense Authorization bill, HR 2100, staff sources indicated the NLC-supported Johnston-Roth-Breaux amendment was in serious trouble. The measure, which would turn over closed military bases and facilities to adversely affected adjacent communities, faces adament opposition from Secretary of Defense Richard Cheney, House Military Installations Subcommittee Chairwoman Pat Schroeder (D-Colo). Pentagon and House staff have argued that the amendment would be an expensive and unaffordable "give-away" to cities. At the same time, the conferees are reportedly near agreement on a $1 billion domestic aid program to the Soviet Union.

The NLC-supported provision is involved in both the House-Senate Defense Authorization and Appropriation (HR 2521) conferences. Sen. Bennett Johnston (D-La) has already indicated that if House and administration efforts to kill the amendments are effective in the authorization conference, he will push for it in the Defense Appropriation conference, on which he serves as a conferee.

Disaster Relief

Separately, the House finally voted and sent to the Senate a $7 billion Emergency Supplemental Appropriations bill, HR 3543. The bill would provide $2.8 billion in "emergency" funding for Operations Desert Shield and Storn, $9433 billion in disaster relief assistance from the Federal Emergency Management Agency (FEMA), $1.75 billion in disaster payments for crop losses, and other provisions.

As adopted by the House, however, any funding not deemed "emergency" by the president--which would include most funding for cities and towns affected by storms, drought, or other natural disasters--would force a sequester to make offsetting savings in all other municipal programs. Rep. Joseph McDade (R-Pa) estimated this would force cuts of 2.7 percent in CDBG, highway, job training and other municipal programs.

The bill had been delayed for several months while it was subject to a bitter dispute between House Appropriations Committee Chairman Jamie Whitten (D-Miss) and Richard Darman, the president's Director of the Office of Management and Budget. The White House requested full funding for the Persian Gulf funds, but has insisted that most of the remaining costs be paid for by offsetting cuts in domestic discretionary programs.

The bill includes $46 million in relief for cities and towns affected by Hurricane Bob, $250 million to assist Oakland to pay for the damage from its massive fire, in addition to more than $600 million to help other cities and towns affected by presidentially declared disasters. Under the House proposed version of the bill all but $500 million of the entire $6.2 billion bill would be defined as an "emergency" exempt from last year's budget law.

Action in the Senate is not scheduled.

Unemployment Benefits Extension

Congressional leaders appeared close to reaching an agreement on a package to provide extended benefits to unemployed Americans after the White House signalled the president was interested in a compromise.

Talks centered around efforts to raise revenues without raising taxes on employers or increasing the federal deficit and violating last year's budget agreement. Republicans were urging auctioning off federally owned broadcast frequencies.
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Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Nov 4, 1991
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