Brushing aside a veto threat from President Clinton, the House passed an $80 billion Republican tax cut Saturday that would be paid for by projected federal budget surpluses.
The vote put Republicans a step closer to a politically charged election-year showdown with the White House and congressional Democrats over an issue that both sides believe will play to their advantage.Republicans said a portion of the excess revenue expected to flow to the government in coming years should be returned to taxpayers, in part to keep Washington from spending it.
Led by Clinton, Democrats have framed the issue as one of fiscal responsibility, saying that to spend any surpluses before they materialize would be reckless and endanger efforts to address the Social Security system's long-term financial problems. Since January, Clinton has been demanding that Congress set aside every penny of the surplus until it has agreed with the administration on a plan to shore up Social Security.
The bill would provide a tax break for many middle-income married couples, exempt some interest and dividend payments from taxation, reduce inheritance taxes, accelerate a plan to allow the self-employed to deduct 100 percent of their health insurance premiums and extend a credit for research undertaken by corporations.
Saturday's House vote, 229-195, was largely along party lines. Eleven Republicans voted against the bill and 19 Democrats voted for it.
The legislation now goes to the Senate, where its prospects are uncertain. Because of the parliamentary rules that will apply to the bill in the Senate, it will require 60 votes for passage, a hurdle that Republicans, who hold 55 seats, said would be difficult to overcome.
Senate Republicans, who earlier this year voted to cut taxes $30 billion over five years, could scale back the House bill to try to win votes from wavering Democrats, although no decision has yet been made. Some Republicans have also weighed attaching the tax bill to a package of spending bills to make it more difficult for Democrats to vote against it and to raise the stakes should it come to a presidential veto.
Battered and strained by Clinton's struggle for political survival, Democrats were clearly happy to turn attention to an issue that could help unify the party and spur more Democrats to turn out at the polls in November.
Clinton, traveling in California, immediately put out a statement saying that the Republican plan "drains billions of dollars from the surplus before we have done the hard work of strengthening Social Security." The president reiterated that he would veto the bill if it reached his desk.
Republicans said the tax burden on citizens, measured as a percentage of total economic activity, was at its highest level since World War II. They said that cutting taxes would help move power out of Washington and back to states and communities while reining in Washington's predilection for ever-larger spending on social programs.
Clinton has already broken his own pledge to put Social Security first by proposing to use the surplus to pay for emergency spending next year for farm relief, increased security at American embassies and the peacekeeping mission in Bosnia, Republicans said. Moreover, they said, the projected federal budget surpluses are so large that there is plenty of room for a tax cut without limiting the options for dealing with the looming crisis in Social Security, which will run short of money to pay benefits when the baby-boom generation retires over the next three decades.
They said their plan would leave most of the surplus - projected by the Congressional Budget Office to be $520 billion over the next five years and $1.55 trillion over the next 10 years - free to help address Social Security's looming difficulties.
"The time has come to admit tax-and-spend has failed," said Rep. Bill Archer, R-Texas, who wrote the tax bill. "It's time to reduce the size of government and to let people keep their tax dollars."
But most Democrats stuck closely to their party line that now is not the time for tax cuts. They said that all the projected surplus for the next five years, and nearly all for the next decade, will come from excess payroll tax payments that are earmarked for Social Security's trust funds.
Once the Social Security surplus is stripped out of the overall surplus calculations, the Democrats said, there is nothing left to pay for a tax cut, making the Republican plan a threat to the nation's long-term fiscal health.
"The passage of this bill will make solving the Social Security problem more difficult, plain and simple," said Rep. Benjamin Cardin, D-Md. "We're raiding Social Security. Without Social Security we have no surplus."
The issue is already showing up in congressional races around the country. The AFL-CIO, a major source of support for Democrats as they struggle to keep Republicans from picking up more seats in the wake of Clinton's troubles, said it began running television commercials in 20 congressional districts last week trying to rally support against the tax cuts.
Although the bill has provisions to benefit big business and the wealthy, its was written by Republicans to appeal to the middle class, and many Democrats said they would have supported it if it did not require dipping into the surplus. The cuts would be worth about $80 billion over five years and $177 billion over 10 years.