 | EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
| STATEMENT OF ADMINISTRATION POLICY
(THIS STATEMENT HAS BEEN COORDINATED BY OMB
WITH THE CONCERNED AGENCIES.)
July 27, 2000
(House)
H.R. 4865 - Social Security Benefits Tax Relief Act of 2000
(Archer (R) Texas and Shaw (R) Florida)
The Administration strongly opposes H.R. 4865, which would reduce the
maximum proportion of Social Security benefits subject to the individual
income tax. H.R. 4865 is the latest in a series of costly tax proposals
considered by the 106th Congress that, taken together, would drain away the
Nation's hard-earned budget surplus -- risking a return to deficit spending
and leaving no on-budget resources to extend the life of Social Security or
Medicare, invest in education, or pay down the national debt. Furthermore,
this bill would divert substantial resources that could be used for a
Medicare prescription drug benefit, and would make substantial general
revenue transfers without adding a single day to the life of Medicare. For
all of these reasons, and absent a Congressional framework for safeguarding
the Nation's financial future, the President's senior advisers would
recommend that he veto the bill.
The current economic expansion is built on the foundation of the tough and
prudent fiscal discipline pursued since 1993. This strategy has helped
bring about the largest surpluses and longest economic expansion in the
Nation's history. H.R. 4865 and other legislation moving through Congress
would spend that entire surplus one tax break at a time -- threatening to
raise interest rates, putting at risk the economic expansion, slowing
investment and productivity growth, increasing dependence on foreign
capital, and reducing the Nation's flexibility to deal with potential
future problems.
Moreover, these tax proposals provide relatively little benefit to the vast
majority of working families. The proposals will provide about as much
relief to the top one percent of taxpayers as to the millions of working
people who make up the bottom 80 percent of taxpayers. As a result of the
tax cuts passed this year, the average family in the top one percent would
receive a tax cut of over $16,000 -- dwarfing the roughly $220 tax cut
received by a family in the middle of the income distribution. A one-third
of a percentage point increase in interest rates as a result of these tax
cuts would raise the payments on a $100,000 mortgage enough to wipe out the
tax cut for such a middle-income family.
The President has proposed a series of targeted tax cuts that deliver 70
percent more tax relief to middle-class families at less than half the cost
of the tax cuts passed by Congress this year. The President's proposals
would maintain fiscal discipline while helping families send their children
to college, care for chronically ill family members, assist people with
disabilities to enter or remain in the workforce, pay for child care, ease
the burden on working families with three or more children, and provide
progressive saving incentives and carefully targeted marriage penalty
relief. Because the President's tax plan would cost substantially less
than the tax cuts proposed by the Congress, there would still be enough
money to provide a Medicare prescription drug benefit, strengthen Social
Security, modernize Medicare, and stay on track to be debt-free in 2012.
Ironically, the Republican leadership has opposed general revenue transfers
to the Medicare or Social Security trust funds when those transfers would
have extended the solvency of these vital programs. Now, if all of the tax
cuts previously passed by this Congress were to be enacted this year or
next, there could be no surplus left to transfer to Medicare even to retain
its current solvency. If the transfers proposed in the bill were
eliminated, it would take five years off the projected life of Medicare --
making the trust fund insolvent in 2020, instead of 2025 as projected under
current law. Even if the transfers proposed in the bill were made, they
would not add a single day to the life of Medicare.
The Administration has proposed a comprehensive plan to modernize the
Medicare program, introduce competition among health-care providers, add a
long-overdue Medicare prescription drug benefit, and extend the life of the
Medicare Trust Fund to at least 2030. The Administration has also made
proposals to extend the life of the Social Security trust fund to at least
2057 and to strengthen the Social Security benefit for the most vulnerable
in our society, especially for elderly widows, who suffer poverty at nearly
twice the rate of the elderly population overall. In contrast, H.R. 4865
would leave more than four out of five Social Security beneficiaries with
no more than they have today.
Resources are available to accomplish great things. The Administration
hopes to work with the Congress on a bipartisan basis to agree on a
balanced framework of tax cuts, investments, and debt reduction that
safeguards the Nation's prosperity and benefits all Americans -- while
maintaining fiscal discipline.
Pay-As-You-Go Scoring
H.R. 4865 would affect receipts; therefore, it is subject to the
pay-as-you-go requirements of the Omnibus Budget Reconciliation Act of
1990. Based on estimates of revenue losses made by the Department of the
Treasury, the absence of any offsets could cause a sequester of Federal
resources.
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