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Clinton warns of tax-cut veto
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September 17, 1998: 1:12 p.m. ET
President threatens to reject bill if social security is not fixed first
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NEW YORK (CNNfn) - President Clinton Thursday threatened to veto the $80-billion tax cut Republicans hope to pass before they head home for Congressional elections.
The proposed tax cut over five years would be funded almost entirely by a budget surplus forecast at $520 billion from fiscal 1999 through 2003, which was calculated by including Social Security funds.
The president repeated his objection to using budget surpluses before fixing social security.
In a letter today to Congress, White House Chief of Staff Erskine Bowles said the president will veto any tax cut or spending bill that changes the budget rules and drains the surplus.
In spite of the veto threat, the House Ways and Means Committee is expected to clear the tax cut plan Thursday for a House floor vote next week.
That tax cut centers mostly on eliminating the so-called "marriage-penalty" tax, which results in some couples paying higher taxes than when they were single.
The proposal would mean an average tax cut of $243 for a joint tax return, reducing taxes collected by the government by an estimated $28 billion over five years.
The bill would exclude from taxation up to $200 in interest and dividend income for singles and $400 for couples, affecting 68 million tax returns. It would lower revenue to the government by $15 billion over five years.
That provision would mean 32 million taxpayers would no longer pay any tax on interest and dividends, according to the plan drafted by Archer.
The bill would allow up to $1 million of an estate to be exempt from inheritance tax starting next year, rather than in 2006 as current law states, reducing revenue to the government by $18 billion over five years.
The HOPE Scholarship tax credit, $500 child credit, dependent-care tax credit and the adoption credit would be prevented from being reduced by the alternative minimum tax. That would amount to an $8-billion tax cut over five years.
Self-employed Americans would be able to fully deduct their health-insurance premiums starting next year, rather than in 2007 as under current law. That would mean a $5-billion tax cut over five years.
The bill would extend some expired and expiring tax credits. The research and development credit, which expired in June, would be extended through Feb. 29, 2000. The alternative incremental credit rate would increase, resulting in a $4-billion tax cut over five years.
The bill would extend the Generalized System of Preferences, which gives developing countries duty-free access to U.S. markets, through Feb. 29, 2000. The program expired in June. Its extension would mean a $535 million revenue loss to the government.
A provision in last year's tax law allowing farmers to calculate their income tax by averaging income in the prior three years would become permanent rather than end in 2001. That would be a $45-million tax cut over five years.
The legislation would extend the same tax treatment to prepaid tuition plans at private universities as at public ones where no taxes are paid on the interest earned in the plan until the money is spent. That would amount to a $572 million tax cut over five years.
Some tax relief was included related to bonds issued to finance construction of new public schools, resulting in a tax cut of $1.4 billion over five years.
The bill would create 20 "renewal communities" -- areas with high poverty and unemployment in which certain investments would receive favorable tax treatment. That would result in a tax cut of $1 billion over five years.
There was only one provision to raise revenue for the government, $5.6 billion over five years, by closing a corporate loophole related to real-estate investment trusts. 
-- from staff and wire reports
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