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Grade Level: 10-12
Subject: Government/Economics

Tax Cut Controversy

Tax Cut graphic When the U.S. Senate adjourned on August 6, 1999, for a one-month vacation, they did so in the wake of a hot economic controversy. Weeks before, House republicans passed a 792 billion dollar tax cut aimed at curbing a projected trillion-dollar tax surplus. The Taxpayer Refund Act of 1999 (bill HR2488) was a reconciliation of previous Republican tax reform measures that had been approved separately in the House and Senate. The redesigned bill passed the Senate with a close 50-49 vote on August 5th, a few hours after the House passed it 221-206, largely along party lines.

The new package stretches over 10 years and would gradually cut 1 percentage point off each personal income tax rate. It also would provide relief from the so-called marriage penalty, cut the personal capital gains tax rate and eventually eliminate the inheritance tax.

Capitol Hill Sounds great, but it's unlikely the mammoth tax cut will ever become law. President Clinton has already promised to veto the legislation the minute it reaches his desk in September, when the Senate reconvenes. Clinton and congressional Democrats would rather use the expected trillion-dollar tax surplus to shore up the troubled Social Security and Medicare funds. They favored a 300 billion tax relief plan.

Which plan do you favor? If there's a tax surplus, is it better to use the money for Social Security and Medicare or is the government obliged to give the money back to taxpayers? You'll need more information to make up your own mind.

A Month of Reporting

National news sources like CNN and MSNBC have reported on the Taxpayer Refund Act practically every day since late July. Maybe you read reports in your local newspaper, too. To get up-to-speed on the unfolding story, browse through some of these past online reports.

Differences between the Senate and House Republican tax cut (7-28-99)
Analysis: Tax debate far from over (7-29-99)
Senate passes GOP tax package (7-30-99)
GOP to press ahead with tax cuts, despite Clinton veto threat (8-1-99)
Republicans agree on tax cut plan (8-3-99)
Senate passes GOP tax cut bill by one vote (8-5-99)
Clinton renews vow to veto tax cut (8-6-99)

What does the tax cut mean to individual Americans? Some could eventually see reductions of close to 18 %. Read the breakdown in this MSNBC report: Couples fare best in GOP's tax cut.

The GOP 800 Billion Cut

Before you make up your mind about the Taxpayer Refund Act of 1999, it's worth reading and considering what lawmakers on both sides of the issue have to say. Starting first with the Republicans who sponsored and support the measure, read Senator Bill Roth's (R-DE) tax relief agreement announcement. Pay close attention to Roth's opening statement on the reasoning behind the Republican measure. How does your view compare with Senator Roth's? Do you agree with his statement?

Armey Next, read A National Call to Cut Taxes from Freedom Works, the Web site of House Majority Leader Dick Armey (R-TX). Also read America Deserves a Refund and the related links throughout the article that you can follow as you read. For fun, there's a Tax Burden Calculator you can use to calculate an estimate of your annual tax burden based on income, family size, and state of residence. Try it for a hypothetical family of five with an annual income of $50,000. Compare the same results with different states.

The Democratic 300 Billion Cut

Clinton Turning to the opposition, congressional Democrats have also presented a tax cut proposal of 300 billion, which President Clinton is willing to sign. Learn why these leaders are so adamant that this is the better alternative. Begin by reading President Clinton: Urging Fiscal Discipline and Debt Reduction on the official White House site. How do his proposed "real benefits for families" differ from the benefits suggested by Republicans?

Next, read the press release by Senator Tom Daschle (D-SD), who insists that the Republican tax measure "misses a once-in-a-lifetime chance to pay down the debt..." Do you agree with him that the Republican measure is "the wrong plan at the wrong time"?

Perhaps the strongest statement against the Republican measure comes from Congressman Richard Gephardt (D-MO). Read the Outrage of the Week, August 5, 1999. He seems convinced that the Republican plan would "cause massive cuts in Medicare, veterans funding, education programs, and farming programs." Are you convinced by his arguments, or is this just an example of political hyperbole and rhetoric? Gramm

Debate

Complete your research by reading the transcript of a Fox Sunday News interview with Senator Phil Gramm (R-TX) and White House National Economic Adviser Gene Sperling. Both gentlemen are highly respected and qualified economists, but which do you think has the stronger position?